Writing off meals and entertainment for your small business can be pretty confusing. Some things are 100 percent deductible, some are 50 percent, and a few are nondeductible. It all depends on the purpose of the meal or event, and who benefits from it.
From a company-wide Beer Friday to a fancy steak dinner with your biggest client, we'll walk you through the different meal deductions your business can take advantage of so you can save big on your tax return.
And if you need a bookkeeper (and tax expert) to guide you through some of this, check out Accracy.
As part of the Consolidated Appropriations Act signed into law on December 27, 2020, the deductibility of meals is changing. Food and beverages will be 100% deductible if purchased from a restaurant in 2021 and 2022. This applies to filing your taxes in 2023.
But for purchases made in 2023 onwards, the rules revert back to how they were defined in the Tax Cuts and Jobs Act. This means purchases at restaurants are no longer 100% deductible.
Here's a breakdown of meal deductions using examples:
Here are some common examples of 100% deductible meals and entertainment expenses:
Here are some of the most common 50% deductible expenses:
If you were deducting meals and entertainment in previous years, you might have noticed the deduction amounts have changed. The 2018 Tax Cuts and Jobs Act brought a few big changes to meals and entertainment deductions.
The biggest one: entertainment expenses are no longer deudctible. But some things haven't changed.
Most work-related meal purchases you can think of are either 100 or 50 percent deductible. But there are a few exceptions. For example, if you pay for your clients' night out but you don't actually go with them, it's nondeductible. The same applies to a client meal at a restaurant where you invite friends or spouses—the cost of your friends is nondeductible (but you can write off half the client bill).
And of course, with the Tax Cuts and Jobs Act, client entertainment is also nondeductible—no more golf games or courtside tickets.
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