Some quick facts about business meals that small business owners should keep in mind.
– In-Town Meals are deductible (usually 50%) if you have a reasonable expectation that the customer or prospect who you are treating will generate some income for your Company. The documentation required is the date, location, amount, who was there, and the business purpose. Save your receipts. If you just go to eat by yourself without a customer or prospect, it’s not deductible at all, only personal, because you could just feed yourself at home for free (sort of).
– Out-of-Town Meals in connection with a business trip that includes at least one night away from home are deductible, even if you do not eat with a customer or prospect, because you are not at home and able to feed yourself for free (sort of). The documentation the IRS requires is basically the same, date, location, amount, and business purpose. You may also be able to deduct out of town meals on a per diem basis, but the documentation is similar.
– Meals with Co-Owners, Partners, or Employees are not generally deductible.
– The food costs of a Company Meeting for training, or safety, marketing strategy, or any legitimate business reason are deductible (usually 100%). Don’t be overly aggressive by scheduling too many of these during the year.
– The food costs of a Company Party are generally deductible. If you have an annual Christmas Party or a Company Picnic, that’s fine (usually 100% deductible). Be careful not to try to deduct more than one or two such parties per year.
– The Amount of the Deduction for Food is normally reduced to 50% of your actual costs for most meals. How much you spend is not very important, so you can be as lavish (within reason) or as frugal as you want. But the documentation is very important and is roughly the same for all types of deductible meals.