Are Business Meals and Entertainment Tax Deductible?

By: Mallarie R. Lima, CPA; ME & Associates

As business owners, we place priority on building relationships and making mutually beneficial connections.  In doing so, we can spend a good amount on meals and entertainment.  A lunch here, a coffee there adds up.  However, some self-employed individuals do not even realize that these types of expenses are tax deductible.

Per IRS regulations, you may deduct meal and entertainment expenses that are ordinary and necessary to entertain a client.  These types of expenses must be closely related to your business in order to be deductible, meaning that there was a clear business purpose.  This includes continuing current customer relations and/or attempting to gain new clientele.  They also must be reasonable, considering the facts and circumstances.

Business meals and entertainment are subject to a 50% deductibility limitation.  For example, a business meal that cost $100 would only be allowed a $50 deduction.

As you consider your meal and entertainment expenses, always remember to keep your receipts; specifically, the IRS will look for the client name and business purpose listed on that receipt.  Many clients do not adhere to these requirements, but there is always the chance of an audit in which that information would be requested.

As we all may know, the number one answer to a tax question is “it depends”. Looking at each situation individually is sometimes necessary to make sure you are receiving the maximum deduction possible.  Other items to consider when expensing meals and entertainment are the rules related to advertising, business gifts, and 100% deductible meals.

If you have any questions, please contact our office at (954) 557-3379.

Mallarie R. Lima, CPA
ME & Associates, Inc.
300 S Pine Island Road, Ste 250
Plantation, FL 33324