Business Meals Deduction
Authority: IRC §274(n)
Business meals with a client, prospect, vendor, or team member are 50% deductible when the meal is ordinary and necessary to the business, the taxpayer or an employee is present, and the setting is not lavish. Entertainment itself (game tickets, golf, concerts) has been nondeductible since 2018, but food purchased separately at an entertainment event still qualifies for the 50% treatment. Several meal categories reach 100%: company-wide events like holiday parties, food offered to the public for marketing, and meals sold to customers. Meals while traveling overnight for business follow the 50% rule, using either actual costs or the federal per diem. Documentation drives survival on audit: the receipt plus a note of who attended and the business purpose. Solo meals during a normal workday are personal and nondeductible; groceries and coffee for the home office are too.
Example
An agency owner spends $6,000 on client dinners and coffee meetings (50% deductible, $3,000) and $4,000 on the all-team holiday party (100% deductible). Total deduction: $7,000 of the $10,000 spent.
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