One of the most frequently asked questions by business owners is whether their meals are deductible. The IRS provides clear guidelines, but social media platforms like TikTok often exaggerate the deductions a business owner can claim. Let’s clarify the tax rules by examining four types of food purchases, starting with those that are not deductible.
Zero Percent Deductible Options:
- Solo meals while you work: A meal you consume alone at your desk are not deductible.
- Snacks or coffee while you work: Personal snacks and beverages consumed during work hours are not deductible.
- Personal groceries: Any groceries purchased for personal consumption are not deductible.
- Lavish or excessive work meals (Sec. 274(k)): Meals that are considered extravagant or unnecessary are not deductible. Determining whether a meal is lavish or excessive is often a judgment call made by the auditor assigned to your case.
Now, let’s move on to the good news! The IRS allows you to deduct 50% of the expense in the following scenarios:
Fifty Percent Deductible Options:
- Meals while traveling for work: If you’re traveling away from home for business, you can deduct 50% of the cost of your food.
- Lunch with a potential client or current client: Meals with clients, whether potential or current, are 50% deductible as long as there is a clear business purpose.
- Work meal with a colleague: Business meals with colleagues are deductible at 50%, provided they are directly related to your business.
- Meals for your employees or contractors: Food provided to employees or contractors for business purposes are 50% deductible.
Understanding these guidelines can help you maximize your deductions while staying compliant with IRS rules. Always keep detailed records and receipts to support your deductions in case of an audit. If in doubt, consult with a tax professional to ensure you’re following the most current tax laws.
