Deducting Business Meal Expenses Under Today’s Tax Rules
In the course of operating your business, you probably spend time and money “wining and dining” current or potential customers, vendors and employees. The big question is, what can you deduct on your tax return for these expenses?
Meal deductions are still allowed
You can still deduct 50% of the cost of food and beverages for meals conducted with business associates. However, you need to follow three basic rules in order to prove that your expenses are business related:
- The expenses must be “ordinary and necessary” in
carrying on your business.
This means your food and beverage costs are customary and appropriate.
They shouldn’t be lavish or extravagant.
- The expenses must be directly related or associated
with your business.
This means that you expect to receive a concrete business benefit from
them. The principal purpose for the meal must be business. You can’t go
out with a group of friends for the evening, discuss business with one of
them for a few minutes, and then write off the check.
- You must be able to substantiate the expenses. There are requirements for proving that meal and beverage expenses qualify for a deduction. You must be able to establish the amount spent, the date and place where the meals took place, the business purpose and the business relationship of the people involved.
Another related tax law change involves meals provided to employees on the business premises. Under old law, these meals provided to an employee for the convenience of the employer were 100% deductible by the employer. Beginning in 2018, meals provided for the convenience of an employer in an on-premises cafeteria or elsewhere on the business property are only 50% deductible. After 2025, these meals won’t be deductible at all.
- The expenses must be “ordinary and necessary” in carrying on your business. This means your food and beverage costs are customary and appropriate. They shouldn’t be lavish or extravagant.