Meals & Entertainment: What Is Deductible and What Is Not?

Probably the most common business deductions are meals and entertainment. However,Meals & Entertainment: What Is Deductible and What Is Not? Articles people are often confused about whether the expenses are fully deductible, partially deductible or not deductible at all.

50% Deductible

The general rule for deducting meals and entertainment expense is that 50% of the cost is deductible provided the following requirements are met.

Requirement #1

The expense has to be ordinary and necessary in the trade, business, or profession. In other words, it must be commonly accepted to have this expense and it must be appropriate in the trade or business. For example, business owners routinely have lunch with prospective clients to discuss business with the goal of attracting additional business. This is a common and necessary business expense.

Requirement #2

The expense must be directly related or associated to the active conduct how much is george clooney worth of your business. To meet this requirement, you must engage in a business conversation during, before, or after the entertainment. If the business discussion is only incidental to the entertainment, the entertainment expenses do not qualify.

The 50% limit applies to business meals or entertainment expenses you have while traveling away from home on business, entertaining customers at your place of business, a restaurant, or other location, or attending a business convention or reception, business meeting, or business luncheon at a club.

100% Deductible

As with every general rule, there are exceptions. The following exceptions result in the meal or entertainment expense being fully deductible.

Exception #1

The expense is fully deductible when providing meals, entertainment, or recreational facilities to the general public as a means of advertising or promoting goodwill in the community.

Exception #2

If the meal is provided to employees as a convenience to the employer on the business premises and is furnished to more than half of the employees, then the expense is fully deductible.

Exception #3

A company holiday party expense is an exception to the general rule and is fully deductible.