Meals write-offs for your business are generally confusing from my experience with small business owners.
Some business meals are 100 % deductible, some are 50 %, and a few are nondeductible. It all depends on the purpose of the meal, and who benefits from it.
From a company-wide Pizza Friday to a fancy dinner with your biggest client, there are certain rules that deductions must meet in order to be deductible.
The Two Types of Meal Deductions
100% Deductible: A food expense that benefits at least half of all employees, or the general public, free of charge. This can be categorized as “Staff Meals or Staff Party”
50% Deductible: A food expense that benefits clients, partners, or just a handful of employees. This can be categorized as “Meals and Entertainment.”
This is the most simplified version of the IRS tax code on this subject matter, but it is a quick reference for you to remember.
Examples of a 100% Deductible Meal
Get excited about any of these receipts:
Bagels laid out for all your employees
Beer or pizza for a Friday company celebration
A company-wide holiday party
Food and beverages for a public appreciation party
Dinner provided for employees working late
In short, any food expense that either benefits the whole company, the general public (at no cost), or a charity, is 100 percent deductible.
Examples of a 50% Deductible Meal
If the meal is work-related, but doesn’t benefit the entire company, it will go under the general Meals & Entertainment category
You can still get excited, but half as much on these receipts:
A meal with a client where work is discussed
Employee meals at a conference, above and beyond the ticket price
Employee meals while traveling (specific rules on what the IRS defines as travelling)
Treating a few employees to a meal (less than half)
Food for a board meeting
So What’s Nondeductible?
There are a few exceptions to the rule… For example, if you pay for your clients’ night out but you don’t actually go with them, it’s nondeductible. The same applies to a client meal at a restaurant where you invite friends or spouses—the cost of your friends is nondeductible (but you can write off half the client bill).
It’s best to start categorizing these properly at the start of each year so you are ready during tax time!
This post is to be used for informational purposes only and does not constitute legal, business, or tax advice.
For more information, contact me at firstname.lastname@example.org