Final answer:
Sarah can deduct $2,500 of her meal and entertainment expenses, which represents the unreimbursed half of her total expenses.
Step-by-step explanation:
Under the tax rules, Sarah is eligible to deduct unreimbursed business expenses. In this case, she incurred a total of $5,000 in employee business expenses, consisting of $3,000 for business meals and $2,000 for customer entertainment. However, Sarah was reimbursed for half of these expenses, totaling $2,500, through her employer's accountable plan.
The deductible amount for Sarah's business meals and entertainment expenses is calculated based on the unreimbursed portion, which is the remaining half not covered by the employer reimbursement. Therefore, Sarah can deduct $2,500 of her meal and entertainment expenses for tax purposes.
This deduction includes $1,500 for business meals, which is 50% of the unreimbursed expense of $3,000, and $1,000 for customer entertainment, representing 50% of the unreimbursed $2,000.
It's important to note that the tax rules stipulate that only unreimbursed business expenses are eligible for deduction. In this scenario, Sarah's reimbursement by her employer covers half of the total expenses, leaving the other half as unreimbursed and thus deductible.
Additionally, the calculation doesn't consider the 2% of Adjusted Gross Income (AGI) limit, which may further impact the deductible amount for certain miscellaneous itemized deductions. However, based on the information provided, the unreimbursed portion is $2,500, and this is the amount Sarah can deduct for her meal and entertainment expenses without considering the 2% of AGI limit.