Business Meal Expenses
Certain meal expenses may be either 50% or 100% deductible if they are incurred for business purposes.
Commonly referred to as meals deduction, meals and entertainment deduction, business meals tax deduction and meals tax deduction.
Do I Qualify for the Business Meal Expenses?
Meal expenses can qualify for a tax deduction when they are connected with the active conduct of a trade or business.
2022 Business Meal Expenses Details
Meal expenses can qualify for a tax deduction when they are connected with the active conduct of a trade or business. To qualify for a deduction, the meal expense cannot be lavish under the circumstances and the taxpayer or an employee must be present when the meal is provided. If those two requirements are met, the meal can qualify for one of two levels of deductibility.
50% deduction: Expenses that are eligible for a 50% business meal deduction include:
• Meals with a customer, client or employee that either include or are immediately adjacent to a business discussion, such as a business lunch or a dinner out at the end of a meeting (includes taxes and tips)
• Meals provided for business meetings in the office (this includes clients and employees who are traveling on business)
• Room rental for a dinner or cocktail party that meets the “active conduct of a trade or business” requirement
• Meals provided on the employer’s premises, including break room snacks and similar items
100% deduction: Expenses that are eligible for a 100% business meal deduction include:
• Employer-provided social and recreational meal expenses incurred for the benefit of employees), such as at a summer picnic or holiday party
• Meal expenses that are treated as compensation to employees or may otherwise be included in the recipient's income
• Expenses related to food or beverages provided to the general public (for example, at a promotional event)
Non-Deductible Meal Expenses
Similar expenses that are not eligible for the meals deduction include: a meal with a customer, client or employee that did not include any business discussion; entertainment costs, including any portion of a ticket to a concert, athletic event or artistic performance that cannot be directly attributed to a meal or other food provided at the event; and dues for certain types of clubs, such as country clubs, social clubs and athletic clubs (meals purchased at these places may qualify for the meals deduction if they meet the requirements above, but the dues paid to be a member are not deductible).
Exceptions for 2021 and 2022
The recent passage of the Consolidated Appropriations Act, 2021, on December 27, 2020, created an exception to certain 50% meals deduction limits. For calendar years 2021 and 2022, meal expenses paid or incurred as part of ordinary and necessary business operations are 100% deductible if such meals are provided by a restaurant. The meal does not have to be eaten at the restaurant; takeout and delivery meals are fully deductible if they meet the requirements.
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Benefits
• Reduced taxable income
• Reduced self-employment tax
Considerations
• Potentially onerous record keeping, although many apps have been created to streamline the process
Assumptions When Taking the Business Meal Expenses
• A business discussion took place directly before, during or after the meal.
• The cost of the meal is not lavish or unreasonable under the circumstances.
• The taxpayer or an employee is present during the meal.
• The amount claimed does not include any “entertainment expenses.” (For example, if a businessperson took a client out to a dinner theater and the expense met all other deduction requirements, only the portion of the ticket cost allocable to food counts toward the meal expense deduction.)
Conflicting Strategies
• Accountable Plan
Requirements to Claim the Business Meal Expenses
• Accurate records must be kept of who attended each meal and the business-related topics that were discussed either during the meal or immediately adjacent to it.
Business Entities That Can Claim the Business Meal Expenses
• Schedule C
• Schedule E
• Schedule F
• Farm Rental
• S Corporation
• C Corporation
• Partnership
The material discussed on this page is meant for general illustration and/or informational purposes only and is not to be construed as investment, tax, or legal advice. You must exercise your own independent professional judgment, recognizing that advice should not be based on unreasonable factual or legal assumptions or unreasonably rely upon representations of the client or others. Further, any advice you provide in connection with tax return preparation must comply in full with the requirements of IRS Circular 230.