How to Deduct Business Meals
Let’s be real – a big part of building a business is building relationships. Often, we build these relationships over coffee, meals, and maybe an occasional drink. So, how do you write-off these expenses that are essential for growing your business? Keep reading to find out!
Deducting Business Meals
Business meals are generally 50% deductible. This means if you take a client out to dinner and your bill is $60, you can write off $30. The IRS lists five criteria that must be met to deduct meals:
The expense must be an ordinary and necessary expense, paid or incurred in carrying on a trade or business.
The meal must not be considered lavish or extravagant, considering the business context.
The taxpayer or an employee must be present at the meal.
The other party must be a current or potential business customer, client, consultant, or similar business contact.
For food and beverages provided at an entertainment activity, the food and beverages must be purchased separately from the entertainment, or the cost must be stated separately on the invoice or receipt.
An exception to this rule is when you are traveling. If you are traveling for business, either out of town or outside of normal business hours, meals by yourself are also deductible. For example, if you are traveling to California for a Mastermind event and have lunch at the airport, that meal is deductible.
What’s Not Deductible
While meals are deductible, entertainment expenses are NOT. These non-deductible expenses include country club membership fees, golf tee fees, yoga classes, sporting events, etc.
Practical Example
Stevie takes a client to a football game and buys hot dogs and beers for herself and her client. The cost of the game tickets is not deductible. However, she can deduct 50% of the cost of the food and drinks, as long as they were purchased separately from the tickets.
Team Meals & Office Parties
Another great perk is that meals for team celebrations, holiday meals, or office parties are 100% deductible. This can be a fantastic way to boost team morale while also taking advantage of tax deductions.
As a Virtual Bookkeeper offering online bookkeeping services and business financial consulting, I understand how crucial it is to maximize your business deductions. Whether you're a small business in Montana or operating online, these tips can help you manage your business bookkeeping effectively. For personalized advice, feel free to reach out to your trusted Montana Bookkeeper.