After watching several videos and reading several articles I landed on one video that does an excellent job of explaining the deduction of meals as a business expense. Presented by Navi Maraj, CPA.
Following the video are notes I jotted down to help you retain the information.
First the disclaimer:
Though this video is an excellent source, the information on this page and in the video is for educational purposes only. Because your situation is unique, this is not meant to be legal, tax, or financial advice.
My notes:
Non-deductible meals:
- Meals by yourself when not traveling are not deductible
- Meals that are part of an entertainment package and not listed separately are not deductible (example: a $100 ballgame ticket that includes hot dogs, but the hotdogs are not listed separately)
50% deductible meals (50% of cost can be deducted)
- This includes most business meals
- Business meals are meals with an employee, partner, vendor, client for the purpose of discussing business (there must be a business purpose for the meal)
- Dining by yourself while traveling out of town on business
- Office food, coffee, snacks for employees
100% deductible
- Special event (example: holiday party) for employees (50% of attendees are employees)
- Meal as part of a public promotion or advertising campaign
Accounting:
- You should have separate accounts in your books for 50% and 100% deductible meals (not one “meals and entertainment” account!)
- Entertainment is no longer deductible
Recordkeeping to claim a meal deduction should include (receipts alone not enough)
- Price of meal including taxes and tip
- Date of meal
- Name of restaurant
- Who present at the meal
- Topic of discussion
Hint: Write “who” and “topic of discussion” on the receipt and snap a picture or file it
More Details:
- The amount deducted should be “ordinary and necessary” for your particular business activity (not lavish)
- You or an employee must be present at the meal
- You can use the meal deduction for the part you pay even if you split bill
- If your spouse works in the business, it can be deductible but don’t abuse it, make it occasional and not a date night
- For 2021 and 2022 business meals were 100% deductible. For 2023 and forward the law reverted to 50% as it was prior to 2021.