How to Deduct Business MealsJul 08, 2022
If you're a business owner, then you know that business meals can be a great way to deduct some of your expenses. However, many business owners are not aware of all the deductions available to them. Here we will discuss the different types of business meals and how they can be deducted. We will also provide a few tips on how to maximize your deduction!
Business meals are a great way to entertain clients, build business relationships, and promote your business. There are many different types of business meals, but not all of them are fully deductible. The IRS has strict guidelines on what type of business meals can be deducted and how much can be deducted and these rules change frequently as new tax legislation emerges.
First, let's review which business meals are 100% deductible. These include meals that you consume while you are traveling. Traveling, however, does not include commuting to your office. You must leave your "tax home." Restaurant meals are also temporarily deductible at 100% for 2021 and 2022 in the wake of the pandemic. Legislators wanted Americans to provide economic support to restaurants to help them recover, and one of the fastest ways to do that was encourage more business meetings. Restaurant meals include dining in or take-away and are only 100% deductible until the end of 2022. Normally, they are 50% deductible.
Meals provided to employees are also 100% deductible when they are working overtime or if you are hosting a training, meeting or company event where employees are present. if you are hosting an event where more than just employees and families are in attendance, consult your tax advisor on the proper deductibility.
There are two key things to remember when deducting business meals and compiling your documentation:
- Document five key elements - It is very important to document who you met with, what was discussed, where you were, how much you spent and when you dined. This is designed to provide evidence as to the business nature of the meal. These can be highly scrutinized because we all need to eat and you have to make a case as to why your business should be able to deduct it.
- Categorize them properly - Naming your meals as Meeting Meals, Travel Meals and even Restaurant Meals (this year especially) can help your bookkeeper and tax preparer properly allocate and deduct these expenses to maximize your savings.
One major additional change that emerged from the Tax Cuts and Jobs Act was the removal of "entertainment" from eligible deductions. This means that if you take a group of clients or business associates to a sporting event, concert or other similar event, the meals are deductible, but not the tickets to the event.
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