Dine & Dash: A Fun Guide to Deductible Business Meals and Entertainment
Can you write off business meals?
Great question! Let’s break it down into 2 common scenarios:
Scenario 1:
You're running a tech startup and you want to impress a potential client. So, you take them to a fancy sushi spot downtown. As you're chatting away about your latest app project, out of nowhere, a huge sushi boat that you didn't even order shows up at your table. The waiter tells you it's a gift from the chef, who's a big fan of your startup and the app you're working on! You and the client share a laugh, dig into the delicious surprise feast, and smoothly transition back into talking business.
Scenario 2:
You're the proud owner of a cozy little bakery and you want to treat your amazing assistant, Emma, to a special birthday dinner at the new French restaurant in town. You both indulge in a scrumptious meal while sharing stories about your favorite TV shows, recent travels, and Emma's upcoming wedding plans. The only time work comes up is when you playfully mention how your bakery's croissants could give the ones at the restaurant a run for their money.
Are these meals valid deductible business expenses?
In scenario one, because you were chatting business with a potential client over this meal, you can actually deduct 50% of the cost (excluding that delicious free sushi boat you enjoyed, of course!) Pretty neat, right? Just a little perk to look forward to!
However, in scenario two, while you're thrilled to celebrate Emma's birthday with a meal together, the main focus is on enjoying each other's company, not conducting business. So unfortunately, this meal isn't eligible to be deducted as a business expense, even though you might assume otherwise since Emma is your employee.
Sometimes it can be tricky to tell if a fancy dinner or outing counts as a business expense or just something for fun. But, if you consistently label personal meals as business expenses, it can cause some problems. You might open yourself up to disallowed deductions, get audited more closely, and even face fines.
Here's a quick rundown on what meals you can deduct:
- Meals with clients or for out-of-town business are 50% deductible.
- Company recreational or social events for all employees (like a holiday party or company picnic) are fully deductible.
- Offering small food & drinks at a business meeting (think coffee, donuts, snacks) are 50% deductible.
- Providing meals for your team when they're working late is also 50% deductible.
- Food and drinks at public events (like an open house or grand opening) are fully deductible.
- Meals for mandatory meetings such as staff, shareholder, or board meetings are 50% deductible.
Remember, while it's tempting to count your coffee runs and office pizza parties as business expenses, make sure your meals are actually working overtime for your business. Because as much as you might wish, your Friday taco truck lunch won’t make the cut for tax deductions, no matter how much you love those tacos!
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