Is Meals And Entertainment Irs Tax Deductible?

Detailed Answer

Business meals are 50% deductible if they are ordinary and necessary expenses incurred in the course of business, and the taxpayer or an employee is present. Meals must not be lavish or extravagant. Entertainment expenses are generally not deductible, even if they are business-related. However, meals provided during an entertainment event can be deducted if they are separately stated and meet the business meal criteria. During 2021 and 2022, meals purchased from a restaurant were 100% deductible due to temporary COVID-19 relief measures. Examples include meals with clients or team meetings at a restaurant. Meals provided to employees for the convenience of the employer, such as on-site meals during overtime work, may also be fully deductible under certain conditions.

Where to Put It on the Tax Form

Schedule C, Line 24b for meals. Entertainment expenses are not deductible and should not be included.

Real World Example

A freelance graphic designer takes a client out for lunch to discuss a new project. The total bill is $100. The designer can deduct $50 as a business meal expense on their Schedule C, assuming the meal meets the business purpose criteria.

Audit Risk & Documentation Tips

The audit risk for meal deductions is moderate. Taxpayers should keep detailed records, including receipts, the business purpose of the meal, and the names of those present. For meals during entertainment events, ensure the meal costs are separately stated on receipts. Maintain a log or calendar of business meetings to substantiate the deduction.

IRS Reference

IRS Publication 463, IRC §274

Relevant Industries

FreelancersConsultantsReal Estate AgentsSmall Business OwnersSales Professionals

Is meals and entertainment irs tax deductible?