Preface: With tax season in progress, entrepreneurs want to maximize tax deductions. The tax treatment of deductible meal expenses varies, and proper categorization of bottled water or those chicken nugget expenses makes your tax filing more accurate. Consider discussing with your accountant sooner rather than later what meal expenses you have, and how to categorize them for financial reporting, because this blog is only an introduction to expensing business meals:
Subway Expenses: And Say Can You Deduct Business Meals?
Credit: Jacob Dietz, CPA
Does your business buy meals for employees and customers? The tax law treats meals differently, depending on the circumstances, and the new tax reform law changes treatment for some meals. This blog explores the treatment for certain meals.
Meals on Premises for Convenience of Employer
An employer may deduct 50% of the cost of meals provided on its premises for the convenience of the employer. For example, suppose ABC Store, LLC runs a huge sale for a week, and their peak sales time is 11 AM to 1 PM. The store wants to have its employees take a short lunch so that the employees can maximize their time on the floor selling to customers. ABC brings in pizza each day of the sales week so that the employees can get back to work in 15 minutes. ABC provided the meals on its premises for its own convenience, and they will deduct 50% of the cost on its tax return. In the past the expense was 100% deductible, but starting in 2018 it is only 50% deductible.
Meals while Traveling
Meals while travelling are generally 50% deductible. For example, suppose there is a 2-day product show in another state, and you send employees to the show with your product. They buy some food while at the show. You deduct 50% of the cost of those meals.
Meals with Clients
If you take a customer to lunch to discuss business, that is still 50% deductible. For example, suppose you take a customer to the local diner and finalize some details of what they will purchase from you. The diner invoice is $30. You deduct $15 on your tax return. This deduction stays the same as it was in the past.
Holiday Banquets and Company Picnics
Some companies enjoy a holiday banquet, such as for Thanksgiving or Christmas. The food for those banquets is 100% deductible. The food for company picnics is also 100% deductible.
The tax treatment of food varies, and proper categorization of food expenses makes your tax filing more accurate. Consider discussing with our firm sooner rather than later what meal expenses you have, and how to categorize them for financial reporting.