Can you guess the tax question I get most often? If you are a small business owner or contractor, the odds are you have also asked this question…
How much of my meal is tax deductible?
Of course the basic answer is the meal must involve a business function. Beyond that, the list of meals you can deduct falls into two categories: 50% or 100% of the meal cost is deductible. Here are the details:
Meals are 50% deductible:
- When involving the business meetings (including office and partner meetings) of employees, directors, stockholders and agents.
- During most business travel. Note: even though an employee many be reimbursed 100% for business travel meals, the meal is still only 50% deductible.
- At conventions, seminars or similar events where the meal is included. If it is not included in the event fee, calculate the cost using a reasonable per diem rate for that locale.
- When the business will benefit from the meal or the meal includes a business purpose when meeting with people associated with the business (clients, vendors, customers)
Meals are 100% deductible when:
- office snacks (coffee, colas, bottled waters, donuts, etc.) are provided on your business’ premises.
- food is made available to the public for free (such as a promotion of your business).
- Your company holds the annual picnic and holiday party.
- You provide food for a charity sporting event.
- You provide a meal of convenience to more than half of your employees while at your place of business (such as when your employees work after general working hours).
Billing a client for a meal? Be sure to separately state the meal cost to receive the full deduction. If the cost of the meal is not separately listed, only 50% of the cost can be deducted.