Can I deduct business meals and entertainment?

Can I Write This Off?

Detailed Answer

According to the IRS, you can deduct 50% of the cost of meals and entertainment if they are directly related to the active conduct of your trade or business. However, there are specific conditions that must be met. The expense must be ordinary and necessary, directly associated with the active conduct of your business, and the business meal or entertainment must occur directly before or after a substantial business discussion. For example, if you take a client to dinner after a business meeting, you can deduct 50% of the cost of the meal. However, lavish or extravagant expenses are not deductible, and the deduction cannot be used for personal or family meals. It's important to keep detailed records of these expenses, including the amount, date, place, and business purpose of the expense.

Where to Put It on the Tax Form

Schedule C, Line 24b

Real World Example

A freelance consultant takes a client to lunch to discuss a new project. The cost of the lunch is $100. The consultant can deduct $50 on their tax return.

Calculation Required

A calculation is required for this deduction.

To calculate the deduction, add up all qualifying meal and entertainment expenses for the year, then multiply by 50%. This is the amount that can be deducted.

Audit Risk & Documentation Tips

To minimize audit risk, keep detailed records of each expense, including the date, amount, place, and business purpose, as well as the business relationship of the person entertained. Receipts are required for expenses of $75 or more.

IRS Reference

IRS Publication 463, Travel, Gift, and Car Expenses

Relevant Industries

FreelancersSmall BusinessConsultantsSales Professionals