Can a Business Meal be 100% Deductible?
Answer: A business meal is 100% deductible only if you eat all of your vegetables.
Ok, just kidding. Unfortunately, eating our vegetables won't save us money on our taxes, though you just might end up living a longer and healthier life, and there's alot to be said for that!
A common tax gripe for business owners is that they only get a 50% deduction for the cost of their business meals and entertainment. Well there are actually a few specific circumstances that allow a full 100% deduction for those expenses, so let's take a look at how you might be able to double those deductions.
Employee Parties: Meals and entertainment provided primarily for the benefit of rank and file employees are 100% deductible. Think company picnics, banquets, holiday parties, that sort of thing. If you are self-employed, including 2-person partenrships, with no employees, then your function still falls under the 50% rule.
Office Snacks: The cost of providing free coffee, soda, bottled water, donuts, fruit, etc to employees to be consumed at the office are 100% deductible.
Office Meals: Meals served at the office are 100% deductible if there is both a valid business reason and are primarily for the convenience of the employer (such as dinner provided so that employees can work late and meet that important deadline, or lunch served during a work meeting or employee training).
Steak at the 19th Hole: Meals served as part of a charity sporting event are 100% deductible if volunteers put on the event, and the proceeds go to a 501(c)3 charity. Dinners served at golf tournaments are the classic example here.
There's No Place Like Home: If you hold a business function at your home, for employees or for business prospects where you might give a sales presentation or a seminar, you can take a 100% deduction if you can properly document the purpose of the event and the attendees.
Giver's Gain: If you are providing entertainment involving ticket purchases, give the tickets as a gift rather than deducting them as a 50%-limit entertainment deduction. This only works for de minimis gifts, so if the tickets are $25 or less, give them as gifts, otherwise you are stuck with a 50% entertainment deduction.
No Invitation Necessary: Meals or snacks provided to the general public are 100% deductible. This works well for realtors holding open houses, or a business sponsoring a table at a concert, park, or other venue where the idea is to promote your business in the community.
Put It On Your Client's Tab: If you bill your client separately for meals and entertainment and receive a reimbursement from them for those costs, you should deduct 100% of those expenses. Your client is stuck with the limited 50% deduction, so don't forward them this article!
Of course, no meal is deductible if there isn't a reasonable business purpose for it, so make sure you document the reason for the meeting or event. Keep receipts for costs exceeding $75, and stay away from overly extravagant costs. The environment should be conducive to business, and be careful not to deduct the costs of non-business guests such as spouses, unless there is a true business reason for their attendance.
So many rules. If you ever have questions or need more information, visit www.ConciergeTax.com or call Robert Gambardella, CPA at 203-767-7197.
