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irs meals and entertainment deduction

TL;DR

The IRS allows a 50% deduction for business meals and entertainment, provided they meet certain criteria.

Detailed Answer

The IRS allows taxpayers to deduct 50% of the cost of meals and entertainment if they are directly related to or associated with the active conduct of a trade or business. The meal must not be lavish or extravagant under the circumstances, and the taxpayer or an employee of the taxpayer must be present at the meal. For entertainment, the expense must be directly related to the active conduct of your trade or business. However, the Tax Cuts and Jobs Act of 2017 eliminated the deduction for any expenses related to activities generally considered entertainment, amusement or recreation.

Where to Put It on the Tax Form

Report this deduction on Schedule C (Form 1040), Line 24b

Real World Example

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

Calculation Required

A calculation is required for this deduction.

To calculate the deduction, add up the total cost of business meals for the year, then multiply by 50%.

Audit Risk & Documentation Tips

There is a moderate audit risk associated with meal and entertainment deductions due to their potential for abuse. Keep detailed records of the date, amount, place, business purpose, and attendees of each meal. Receipts are required for expenses over $75.

IRS Reference

IRS Publication 463, Travel, Gift, and Car Expenses; IRC Section 274(n)(1)

Relevant Industries

FreelancersSmall BusinessConsultantsSales Professionals

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Disclaimer: This is for informational purposes only and should not be construed as tax or legal advice. Always consult your tax advisor.

Page created on July 7, 2025

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