Money Discussion

Is Hiring an Escort Tax Deductible

Well, here is a question I never expected to see come across my desk. One of the local business owners called me up to ask a question about taxes. Now, as we are nearing the tax deadline, I start fielding a lot of calls from clients about taxes. The most common theme among these questions is business owners asking if something is tax deductible or not.

I have had all kinds of questions on this topic from business owners trying to stretch expenses into the realm of tax deductibility. 

Is there a way I can call my family vacation a business trip and deduct it?

I bought my kid a new laptop for school. Can I deduct that from my business?

I upgraded everyone in the family to a new iPhone. Can I write that off as a business expense?

Today I got one that I had never seen before.

If I hired an escort to come with me to a business function, is that tax deductible?

Now I think I have seen it all.

Let’s start first with what I imagine is the most obvious question for most of you. Is hiring an escort legal in the first place?

An escort is a legal, recognized job where a person is paid for their company. They can attend social functions, events, or simply go out to dinner or watch Netflix with you. 

People frequently interchange the terms “escort” and “prostitute”, however a person paid to accompany someone to dinner or to some other function does not involve a crime.

In some areas, not only is escorting completely legal but it is highly monitored and regulated. For example, you will find lots of listings like this one for Beverly Hills escorts. In California, these escorts need to file an application, submit photos for identification, and prove they are over the age of 18.

In all states, the line between escorting and prostitution is crossed if an agreement is made for an escort and client to exchange money for sex and is illegal, except in a few areas of nevada.

In other words, you can Netflix with your escort, but you cannot Netflix and chill.

That being said, the legal area becomes a little more grey if a client and escort have a consensual sexual relationship.

All of that being said, each state’s laws around escorts are a little different. If you are going to hire one, be sure to check with what is allowed in your state or the state you are visiting so that you stay out of trouble.

Now let’s get to the question at hand. As a business owner, you hired an escort to attend a professional function with you. Can you deduct the escort’s fees as a business expense on your taxes?

Anything against the law is never tax deductible, but we already established that hiring an escort is not against the law. 

The challenge would be in justifying the expense as an ordinary and necessary business expense, as required by the IRS.

Someone once tried to argue that their expenses for prostitutes should be tax deductible because of the “health benefits of sex therapy.” That was certainly a stretch, and the tax court ruled against him citing that his “payments to various prostitutes were personal expenses not prescribed by a doctor and not intended to treat a medical condition.” The court also noted: “Patronizing a prostitute is illegal in the state of New York.”

Doing a little more research online, I found someone who suggested hiring an escort that is also a trained and licensed bodyguard, which is a perfectly legal tax deduction. I’m not so sure how many escorts are also walking around with their bodyguard license out there, so probably not a viable solution.

At best, it is maybe an entertainment expense, but I believe even that would be stretching it and tough to hold up against an audit.