There have been numerous questions sent me about the deductions for meals and entertainment and for good reason. Something that was so simple was made incredibly complicated. Congress must not have a dictionary near them in order to define the word “simplicity.”
Thus, I want to give you a comprehensive chart that will illustrate not only what meals would be deductible but also what percent of the meal you would get as a deduction. You would be wise to not only share this post but also to print this out for the future:
Type of meal – Amount Deductible
Entertainment with clients and prospects – Zero
Year-end party for customers – Zero
Gold, sporting events, theater with customers – Zero
Type 1 meals
- Meals with clients and prospects* – 50%
- Meals with your business partner, officers, etc. – 50%
Type 2 meals
- Meals while on travel status away from home – 50%
Type 3 meals
- Employee Meals for employer’s convenience – 50%
- Employee meals for required meeting – 50%
- Meals costs at Chamber of Commerce meeting – 50%
- Food in office for employees (donuts, soda etc.) – 50%
Type 4 meals
- Year end parties for employees and spouses – 100%
- Team building recreational activity with employees – 100%
- Meals for general public at marketing presentation – 100%
- Food served at “Open House” when selling property – 100%
- Food served at restaurant by the restaurant – 100%
Type 5 misc.
- Business gifts – 100% up to $25
- Gifts of entertainment tickets – Zero
- Promotional items (generally under $4) – 100%
* Meals with prospects is in dispute as to whether it is 50% deductible or is considered non deductible entertainment. Most tax professionals, ( and the head of the joint committee of taxation) have opined that meals with prospects are 50% deductible.
So much for tax simplification. Hopefully this will be a great reference for both you and your friends.
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