It is estimated that, in the United States, some $30 billion of goods each year—yes, $30 billion—is spent at home parties or on person-to-person direct sales. Hosting a party can be one of the most fun and least intimidating ways to generate sales for the company and income for you.

If you host a party at which sales are made—whether that’s for kitchen gadgets, lingerie, cosmetics, or any other item imaginable—any gift you receive for giving the party is considered by the Internal Revenue Service (IRS) to be a payment for helping a direct seller make sales. That means that you must report that gift, or payment, in your tax return.

In general, you can deduct only 50% of your business- related meal and entertainment expenses. The 50% limit applies to employees or their employers, and to self- employed persons (including independent contractors who host parties at home) or their clients, depending on whether the expenses are reimbursed.

The 50% limit applies to business meals or entertainment expenses you incur while:

•  Entertaining customers at your place of business, a restaurant, or other location, or

• Attending a business convention or reception, business meeting, or business luncheon at a club.

If you are an employee, your out-of-pocket business party expenses are subject to the 50% limit for meal and entertainment expenses. These expenses are deductible as miscellaneous itemized deductions subject to the 2% adjusted gross income (AGI) limit on Schedule A, Form 1040, but only up to the amount of income you receive for giving the party. Remember the IRS has strict rules to ensure that there is a strong business connection to the meal and entertainment before even the 50% deduction is allowed.