If you’re unsure about the current federal tax rules for business meals and entertainment expenses, you’re not alone. The rules have evolved in recent years. Here’s a breakdown of what’s deductible in 2024:
Current Rules
The Tax Cuts and Jobs Act eliminated most deductions for business-related entertainment. For example, you can’t deduct costs for taking clients to a round of golf or a sporting event. However, you can still generally deduct 50% of business-related food and beverage costs.
What Counts as Food and Beverage Expenses?
The IRS defines food and beverage costs broadly, including meals, snacks, sales tax, delivery fees, and tips. To deduct 50%, the food and beverages must:
- Be purchased separately from entertainment activities, or
- Be itemized on a receipt showing their usual selling price.
If not purchased separately, 50% of their approximate reasonable value can still be deducted.
Additional Deduction Rules
The IRS allows a 50% deduction for business meals if these conditions are met:
- The meal isn’t lavish or extravagant.
- The taxpayer or an employee is present.
- The meal is with a business associate (e.g., a client, supplier, or partner).
Even meals consumed while working late or traveling for business are deductible under these rules.
Business Travel
While traveling for business, you can deduct 50% of meal costs if properly substantiated. However, meals for spouses, dependents, or others accompanying you aren’t deductible unless they are employees traveling for legitimate business purposes.
100% Deductions
Certain exceptions still allow a 100% deduction for meal and entertainment expenses:
- Recreational activities benefiting all employees (e.g., holiday parties).
- Food and entertainment offered to the public (e.g., promotional events).
- Meals and entertainment sold to customers at full price.
- Expenses reported as taxable compensation to employees or non-employees (e.g., prizes).
- Meals provided by restaurants or catering businesses to employees working at the venue.
Bottom Line
Understanding the rules for business meal deductions can help you maximize tax savings, but they can be tricky. Reach out to us with your questions or to learn more.
