By Sarah Presnell
The general rule for meals and entertainment expenses is that these expenses are only 50% deductible on a tax return. The rules limiting meals and entertainment expenses have been modified over the years and while some expenses are now 100% disallowed, certain expenses qualify for 100% deductibility. What expenses qualify for 100% deductibility? The list below outlines which meals and entertainment expenses taxpayers can deduct 100% on their tax return:
- Recreational expenses such as business holiday parties, company picnics or similar activities.
- Meals provided on the employer’s premises for more than half the employees for the convenience of the employer. An example would be meals provided so employees can work late.
- Minor (de minimis) employer-provided meals and entertainment that are small in amount and relatively difficult to track. Office snacks or drinks provided to all employees would come under this rule.
- Meal expenses for which the business is reimbursed. An example would be a business incurring meal expenses on behalf of a client or customer.
- Meal expenses made available for the general public at a trade show or for advertising and promotional purposes. A retail store that offers food samples to the general public-people who are potential customers-may claim these expenses as deductions.
- Meal expenses included in the income of persons who are not employees. This includes expenses reimbursed for an independent contractor rendering services for a business.
- Tickets to a charity sporting event where the proceeds benefit the charity and the event is staffed by volunteers.
- Costs (other than meals) for IRC 501 organizations such as Rotary and Kiwanis.
Taxpayers should set up and maintain separate accounts for 50% and 100% deductible expenses. Please contact BCS for any questions on how to do this or on the above list of expenses.