When travelling on business, it is good practice to keep your receipts because “meals spent on business purposes are tax deductible,” aren’t they?
Let’s learn how to deduct business meal expenses like a bookkeeper!
There are two deduction methods: the 50% and the 100% deduction.
The 50% deduction
Use the 50% deduction if the meal has a clear business purpose, such as meeting with customers, suppliers, a consultant, or other business contact. Just mark the receipt for who you were meeting and why. Then upload a photo of it to the transaction record in your accounting software, or use a receipt tracker like Dext or Expensify.
The 100% deduction
The 100% deduction is for your people. It applies if you are an employer paying for meals for your employees. It also counts on money spent on meals supporting a charitable cause, or if the food is needful for your business’s operation (catering industry, food critic, etc.).
Entertainment expenses are not deductible in the U.S. For example, let’s say you went to a Denver Broncos football game with a client and bought some food at the stadium. The food expense is 50% deductible. The tickets for the game, however, do not count as a deduction.
Warning: Do not overstate the food costs at an entertainment event as a ‘clever’ way to stuff your entertainment expenses into a tax-deductible category. The IRS looks at meal expenses for ‘lavish and extravagant’ spending. It sets off their alarm bells if you eat modestly but then feast like a president whenever dining with clients. Also, claiming your nachos at Empower Field cost $78 would be a low-trust move.
For more info on IRS info on meals and business deductions, check out publication 463.
If you want more than to simply deduct business meal expenses, and get a real bookkeeper on your side, schedule a bookkeeping strategy session with me. I can help you get organized so that when it’s tax time, your CPA will have everything they need.
Disclaimer: Allen Bookkeeping Solutions LLC is a non-CPA bookkeeping and accounting service. It is not an enrolled agent or attorney. This material has been prepared for informational purposes only.