Deducting Meal and Entertainment Expenses

Business Deductions

Don't overlook these!

10 Oddball Tax Deductions

Updated for 2012

Only 50% of the following expenses are deductible (applies to self-employed persons and employees)

See exceptions to the 50% limitation rule below.

Transportation costs to and from the restaurant and/or entertainment facility are fully deductible (not subject to the 50% limitation).

If meal and entertainment expenses fit any of the following exceptions, they are fully deductible:

Recreational and social activities for employees:
- This includes activities such as:
  - the company Christmas party and company picnic
  - occasional meals, such as a pizza party,
  - the Thanksgiving turkey or ham you give to employees
Promotional activities:
- For example, you provide food and beverages to members of the general public who agree to sit through your sales presentation.
Tax-free de minimis fringe benefit:
- This applies to expenses of providing an employee cafeteria on the employer's premises and more than 50% of the employees to whom meals are provided are furnished the meals for the employer's convenience.
Meals and entertainment you pay for employees:
- You may deduct 100% of the cost of meals and entertainment if the cost is included in the employees compensation subject to income tax withholding.
Restaurants:
- If you provide meals to employees at your own restaurant do not include the cost in your employee's compensation. Instead, include the cost in your cost of goods sold.