Deduct Business Meals the Right Way

Deduct Business Meals the Right Way

Suppose you take a favorite client out to dinner to celebrate a business  milestone.. If you own a business, are self-employed or run a side business, can you deduct any of the cost?

Make it clear that it is a business meal

Previously, small businesses could deduct 50 % of the costs of both business meals and entertainment with

clients. Now, the meal deduction is still 50% but entertainment costs are no longer deductible.

The problem is that separating a business meal from client entertainment is not always easy. If you provide a  client dinner and tickets to a sporting event, the tickets are not deductible, but the meal may be.

If you use the meal to discuss business, you should be safe to take the deduction. But if it’s just to socialize, it is not deductible.

Document it

The easiest way to do this is to keep a business log. In addition to recording the time, date, place, and cost of the meal, list each person that was present, their position in the company, and their professional title. Then add a short description of the specific business purpose, such as: Discussed new products and competitive price structure.

Avoid luxury meals

Deductions for large expenses on meals and entertainment will always be hard to defend. So if you are having a serious business discussion over dinner, make sure it’s not at a luxury restaurant.

Remember, business meals are still deductible, but must be properly documented. If done correctly this deduction should withstand any audit risk