Tax law allows businesses and self-employed individuals to deduct a portion of certain meal expenses from their taxable income. This deduction is relevant when meals are purchased for business purposes, such as meeting with clients, employee meals, or meals during business travel.
1. Qualifying Business Meals
To qualify for the deduction, the meal must meet certain conditions:
- Business Purpose: The meal must be directly related to conducting business.
- Presence of People: A business owner, employee, client, or business associate must be present.
- Proper Documentation: Keep records of the meal, including date, location, attendees, and business purpose.
2. Deductible Meal Types
- Meals with Clients or Customers: Deductible at 50%
- Employee Meals During Business Travel: Deductible at 50%.
- Meals for Employee Convenience: If provided for the employer’s convenience on company premises, the meals may be 100% deductible as a fringe benefit.
- Company Holiday Parties: Fully deductible (not subject to the 50% rule).
3. Non-Deductible Meals
- Meals considered “lavish or extravagant” are not deductible.
- Personal meals not related to business are not deductible.
4. Documentation Requirements
The IRS requires you to maintain records, such as:
- Receipts showing the total amount, location, and date of the meal.
- Business Purpose: Notes explaining the purpose of the meal and who was present.
