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