Qualifying Meals and Entertainment could be 100% tax deductible if it is part of running your business. Making sure you win that big contract through a little R&R, or having lunch meetings with clients, or even a simple employee meal will help you pay less tax besides providing an added perk to your employees. The key is having a separate record for all meals and entertainment provided to your clients and employees to help your accountants determine which would be 100% deductible, 50% deductible and not at all deductible. A separate travel expenses record should also be in place because it is 100% deductible.

The following are fully deductible expenses:

• Minor employer-provided meals, entertainment and other benefits that are relatively difficult to track. Examples are free coffee, soft drinks, snacks, etc. usually consumed within the office premises
• Tickets or packages involving sporting events whose proceeds are payable to a registered charity, and are staffed primarily by volunteers.
• Employer-reported meal or entertainment expenditure as W-2 income to employees. Examples are team-building trips reportable to the participating employees.
• Corporate-incurred expenses on behalf of a client/customer provided there is an adequate accounting of such expenditures
• Costs associated with various IRC 501 organizations
• Trade show costs, receptions, etc. open to the general public, or seminars/conferences/entertainment/ etc. open to the general public or for which customers/clients pay for attendance
• Meals Provided to Certain Employees Working at Remote Locations: including, oil platforms, vessels and certain long-haul truckers

With the proper understanding of the rules, you need not add up all your meal and entertainment expenses and deduct 50% from the total as your tax savings. Keeping good records and documentations for these expenses will help you save on tax, improve cash flow and keep your employees and clients happy.

Bookmark this page