A Guide To Business Meal Deductions

As a business owner or employee, you may be entitled to deduct a portion of your meal expenses from your taxes. But which meals qualify for this deduction? In this blog post, we will explore the types of meals that can be deducted as business expenses, the rules and guidelines for this deduction, and how to take advantage of this tax-saving opportunity.

What are Tax Deductible Meals?

Tax deductible meals are meals that are considered a necessary and ordinary business expense for business owners, employees, or clients. The IRS defines the allowable business meal expenses as any meal incurred while traveling for business, entertaining a client, or conducting business-related discussions with a colleague.

Types of Tax Deductible Meals

Not all meals are deductible for business purposes. Here are a few types of deductible meals:

1. Travel Meals – When you travel for business, you may have to stay overnight, and you may need to purchase meals while on your trip. These meals are deductible as long as they are not lavish or extravagant.
2. Business Meals with Clients – If you entertain clients or potential clients, the meals you provide or share with them can be deductible. However, the meal must take place in a business setting, and you must discuss business-related topics during the meal.
3. Meals with Colleagues – If you have a business meeting with colleagues that involves a meal, the meal can be deductible. However, the meal must take place in a business setting, and you must discuss business matters during the meal.

Rules and Guidelines

To take advantage of tax-deductible meals, you need to follow some rules and guidelines:

1. Keep Accurate Records – You will need to keep accurate records of the meal, including the date, location, purpose, and the people who were present. Every expense incurred must be supported by a receipt.
2. Determine the Deductible Amount – The total amount of meal expenses that you are allowed to deduct depends on the type of expense. For example, if you are traveling for business, you can deduct 50% of the meal expense, while Business Meals with Clients are usually only 50%.
3. The Meal Cannot Be Extravagant – The IRS requires that your meal expense be ordinary and necessary for business purposes. Expenses that are extravagant or are considered as entertainment purposes are not deductible.
4. Stay Within Required Limits – The IRS has set daily limits for the amount of meal expense you can claim per person based on the city you are in. These limits vary based on the location, so make sure that you stay within these guidelines.

How to Take Advantage of This Deduction

If you own a business or work for a company that allows for tax-deductible business meals, you can take advantage of these deductions by keeping accurate records of all expenses. Make sure to save all receipts, keep a detailed log of the reason for the expense, date, individuals present and the location of the meal.

Remember that you cannot deduct extravagant meal expenses and that the meal must be ordinary and necessary. If you are unsure if a meal expense can be deducted, consult with a tax professional or accountant to make sure that you are taking full advantage of all eligible deductions.

In conclusion, as a business owner or employee, it’s essential to understand the tax rules and guidelines related to deductible meal expenses. While these expenses cannot be extravagant or for entertainment purposes, they can be a valuable tool for reducing your overall tax burden each year. Keep accurate records and consult with a professional to ensure that you are maximizing your available eligible tax deductions.