Donna Genie (YouTube, Aug 15, 2023) explains US small-business tax rules for meals and entertainment: entertainment expenses (tickets, sporting events, golf) are no longer deductible. Business meals can be deducted only for a bona fide business purpose; generally 50% deductible under the 2023 rules (temporary 100% allowance applied in 2021–2022). To deduct your own meal while traveling you must be more than 60 miles from your home base; meals with clients/vendors/colleagues are deductible when documented. Required documentation: restaurant receipt with location, amount, date, who was present, and business purpose; keep original receipts (not just credit-card statements); receipts must be retained for amounts over $75. Meals provided to employees (office food/meeting food) are 50% deductible.
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Meals and entertainment is another place where I get a ton of questions from my small business owners. So let's take a minute and dive into meals and entertainment. We're going to take the easy one first. Entertainment no longer deductible in any way, shape or form. So you can't go to a sporting event and write off the cost of the tickets, nor can you give those to your employees and write them off. You can only do the meals part that is associated with that. No more golf trips or playing golf as a business expense. That one is out 100%. Let's talk a little bit about the fun part about meals. Let's have a good dinner, right? All right. Meals can be deducted so long as they are for a business purpose. If you are at home or near your home location, meals can be deducted. But you can't just say, it's a busy day, I'm going to go have some lunch and deduct that. In order for you to deduct your own meals, you must be more than 60 miles from your home based if you are meeting with someone. However, that's a different story. So if you're meeting with a potential client, a vendor, another colleague, those meals expenses can be deducted. Now, meals used to be 50% deductible. And then in 2021 and 2022 we went up to 100%. 2023, we are back to the old rules. 50% deductible, whether that's Morton's or McDonald's, you get 50% of the cost of the deduction for business meal, however, we'll take 50% over no percent like entertainment. When we look at going out to eat, what do you need to document? Well, if you get the receipt from the restaurant, you're going to have a good piece of that. So you need where you were, how much the meal was, the date. Okay, and now on that receipt you need to add two more pieces. Who you were with and what your business purpose was for that meal. What did you discuss that made that be a business deduction? Now, commonly I get questions about family owned businesses. So I am a family owned business, My husband and I own the business. If we go out to eat, is it deductible? Well, depends what we talked about and if we document it properly. So going out to eat with your spouse can be deductible if you're both business managers, owners positions in the company. Now if you work in the company and your spouse has a completely different job and it does not have a position at your company, that's not deductible. However, let's assume for a moment, like my case where my husband and I are both business owners. When we go out to eat, if we talk about business, it's deductible. If we don't talk about business, it's not deductible. So it really comes down to the purpose and that's what you want to make sure that you document. However, we quite often do go out to eat. And as business owners, most family owned businesses, it's part of your life. You're going to talk about business at dinner. That's all in. We are all in. So when you do that meeting and you deduct that, please make sure that you charge that on your business expense card, your credit card for the business. Keep your receipt. The receipt must be kept if it's over $75. Now, these days, $75 doesn't go as far. You could spend that at Five Guys for a nice dinner. So make sure you're keeping all of your receipts. A credit card statement is not a receipt. You must have the physical receipt from the restaurant as part of your documentation. Now, we always recommend with receipts, don't just keep the pieces of paper, scan those. Or we have receipt apps that we use with our clients. Make sure those are easy. In case of an audit, you can just pull those all out. You are ready to go. Also, one other thing I'll mention, we did have a rule change about bringing in food for employees. So if you bring food into the office so that your employees can continue to work or because you're having a meeting of some sort, those are 50% deductible. Now, they used to be 100, went down to 50%. So make sure that you're keeping track of those and that they are properly categorized as meals too. I hope that helps clarify the meals rules for you as well as entertainment not being deductible. Keep up with the meals and have a great dinner.
