What is a Meals and Entertainment Expense?

The IRS recognizes that wining and dining customers, vendors, or potential employees is a vital way to grow your business, which is why they offer a 50% deduction of all qualifying Meals and Entertainment expenses. You can deduct food as a business expense if you can 1/ verify that these expenses are business related, and 2/ document these expenses (in case of an audit).

Ok so if there is food involved, then it must be considered a Meals and Entertainment Expense right?

Not necessarily. In some cases, you can deduct 100% of the cost, like this example. A few years ago, I spent over $50,000 on hosting educational seminars to attract clients and grow my business. Though the seminars included food, they were far more educational than entertaining. I was able to claim a 100% deduction because I filed the expense as a marketing one, not a meals and entertainment one.

So, how do I know whether it’s a Meals and Entertainment Expense or not?

Answer the following questions:

1/ Was the food bought as part of a marketing expense?

2/ Was the food bought while traveling?

3/ Did you order pizza for your employees during a “working lunch?”

4/ Did you buy coffee and donuts for an early staff meeting?

Depending on your answers, you might be able to deduct the full amount instead of the standard 50%. Want to find more ways to lower your tax liability? Download our free Tax Myth eBook here.

*image by Gabriel Gurrola

It’s not uncommon for entrepreneurs to start conducting business from their home office (at least in the beginning). Not only is it a great way to minimize office space rental costs, but you can also save money on commuting and dining out (if you can keep your trips to the refrigerator to a minimum, that is.) If you are conducting business at home, you can also write off your home office to reduce your tax liability.

If your accountant has ever told you that a home office deduction will put you at an immediate risk for an audit, please consider hiring a new accountant. Not only is a home office deduction LEGAL, MORAL, and ETHICAL, but there are four different ways (YES, FOUR!) to do it. If writing off your home office was risky, why on earth would the IRS give you four ways to do it?

Here are Four Legal, Moral, and Ethical Ways to Write Off Your Home Office:

  1. 1. Depreciation – Don’t do this one; VERY rare when this is best.
  2. 2. 14 -Day rental rule – Rent your house (to yourself even) for 14 days, there is an actual box on your tax return for this one, it says “14 Day Rental” next to it.
  3. 3. B.U.P. 1 – Business Use Percentage based on square footage (better for smaller homes)
  4. 4. B.U.P. 2 – Business Use Percentage based on number of rooms (better for Texas-sized homes)

So as you can see, writing off your home office is not only legal, moral, and ethical, but it’s also pretty smart. At Financial Gravity, reducing your tax liability is ALWAYS a green light.

Want to discover more LEGAL, MORAL, and ETHICAL ways to reduce your tax liability? Download our eBook today. Did we mention that it’s FREE?

*image by Gabriel Beaudry 

Let me be frank with you, kids are expensive. Not only are you spending your hard earned money on their bare essentials (Capri Suns, iPads, and hoverboards, OH MY!) but then you also have all the extras like hockey lessons, prom hair, and summer camp tuition. Anyone that tells you that the financial burden goes away once your kid is eighteen, is just plain lying to you. On average, American parents spend $20,000 per year to send one child to college (and another $20,000 paying for their weddings.)

Though your kids may continue to give you a sense of purpose, a reason to wake up in the morning, and an indescribable joy, there is no denying the fact that they are also inadvertently putting a huge dent in your wallet. That’s why I want to encourage you to start thinking of your children as assets instead of expenses (or in other words, I want you to hire your kids.)

I know what you’re thinking, “Hiring my kids? That sounds sketchy!”

Actually, it’s not at all. As long as you have a written contract, you are paying your “employee” through the payroll (so the IRS gets their fair share), and the money is being deposited into your “employee’s” account, it’s totally legal, moral, and ethical.

Here’s what it looks like:

  1. 1. Pay your kid $6000
  2. 2. File a return with the standard deduction of OVER $6000
  3. 3. Pay NO tax. (And no, you don’t have to worry about paying their portion of FICA. If you hire your own kid, FICA is waived.)

I couldn’t make this “green light” up if I wanted to! Learn More About the 10 Tax Myths Sabotaging Your Small Business Growth.