How to Write Off Business Meals – Bookkeeping Affairs, LLC

How to Write Off Business Meals

by Cynthia Franklin

The IRS heavily scrutinizes meal expenses, but don’t be afraid to take the deduction.

Meeting with a prospect over a high-quality meal can be a great way to make a lasting impression or close a deal.

Business meals are normally 50% deductible for business owners, however, for the tax year 2022, meals are 100% deductible as part of the CARES act. Entertainment expenses are no longer deductible as of 2017.

In order to deduct your business meals, you’ll want to make sure you follow the guidelines as outlined below.

What counts as a business meal?

If you meet with a client, prospect, employee, or business contact to discuss a business matter, you can deduct the cost of the meal, including drinks. You or an employee must be present, and the meal must not be lavish or extravagant given the circumstances. The meal must also be ordinary and necessary according to the IRS.

If the meal was at an entertainment venue, the entertainment portion is not deductible – AND the meal must be billed separately.

Here are some examples of deductible meals:

Meeting with a client, colleague, vendor or employee
Coffee with a client
Coffee with an applicant
Meals while traveling for business
Snacks for open houses
Off-premise staff holiday party
Staff happy hour (given that no one is excluded)
Meals provided to employees working late or through lunch

Keep in mind that the meal must involve meeting with someone to discuss business matters. Picking up coffee or food for yourself or a teammate on the way to work does not count as a business meal deduction. Meals while traveling are only deductible if the whole trip is primarily business related.

Audit-Proof your Business Meals

Save documentation of your meetings! Keep track of who you met with, what you discussed, as well as when and where you met for the business. Write the information on your receipt, or keep a spreadsheet detailing the information in case of an audit.

You don’t need to provide all of your receipts to your tax preparer or bookkeeper – just keep them handy in case of an audit. However, your bookkeeper can help you keep track of this information within your bookkeeping software, or help you upload receipts into the cloud to make this process easier.

Taking a Standard Meal Allowance (Per Diem)

If you are traveling within the United States for business purposes, you may be able to deduct a standard per diem rate per day of travel for meals and incidentals. Sometimes, the per diem rate results in a higher deduction for business meals while traveling than actual expenses. This can simplify your recordkeeping requirements for business meals while traveling (but not locally).

Book a free discovery call today to learn more about keeping track of your business meals.