Claiming the IRS Meal Allowance
If you're self-employed, you may claim 50% of your business-related meal costs on Schedule C.
If you're an employee and are not involved in an Accountable Plan at work (see below), use Form 2106, Employee Business Expenses or 2106-EZ to report your meal allowance along with your other unreimbursed business-related expenses. Only 50% of the meal allowance is deductible.
The 50% meal allowance is deducted on Schedule A as a miscellaneous itemized deduction. It's added to any other miscellaneous deductions you may have and is subject to the 2% of adjusted gross income (AGI) floor.
For example, if your AGI is $50,000, to get a tax benefit, your unreimbursed business-related expenses must exceed $1,000 (2% x $50,000). So, if your total Job Expenses and Certain Miscellaneous Deductions on Schedule A are $1,100, only $100 will be deductible on Line 27 of Schedule A.
Under an accountable plan an employee must substantiate all business-related expenses to his employer and does not claim business-related expenses on his tax return.
If you're an employee and are reimbursed by your employer for your business related expenses under an accountable plan, the reimbursement is tax free (not included in your income) even though it covers 100% of your meal costs. If you get an advance, the unused part of the advance must be returned to the employer.
On the other hand, if you're not involved in an accountable plan at work and you claim unreimbursed business expenses on Schedule A of your tax return, those unreimbursed expenses must exceed 2% of your adjusted gross income to get a tax benefit.
Transportation Industry Workers
Individuals subject to the Department of Transportation hours of service limits, such as, interstate truck drivers, pilots, railroad operators, and other transportation industry employees, may claim 80% of food and beverage cost when working away from home rather than 50%.
Your lodging expense is your actual cost. There is a per diem allowance for employers to use to reimburse employees.
Per Diem Travel Allowance Under an Accountable Plan
An employer may choose to:
- Reimburse an employee for substantiated out-of-pocket travel expenses or
- Use a per diem allowance to cover meals, lodging, and incidental expenses of an employee on a business trip away form home.
If you're not related to your employer, you don't have to give your employer proof of your actual expenses if you receive a per diem allowance or reimbursement that is equal to or less than the federal travel rate for the particular area. However, you must account for the time, place, and business purpose of your travel. If you don't provide an accounting for some travel days, you must be required to return the per diem allowance received for those particular days in order for the employer's plan to qualify.
Federal Travel Rate:
The official source for the federal government per diem rates allowable for expense reimbursement for business travel away from home within the continental United States (CONUS) is the General Services Administration.
GSA establishes the per diem rates for the lower 48 Continental United States (CONUS), which are the maximum allowances that federal employees are reimbursed for expenses incurred while on official travel.
On the GSA website you will find the FY 2016 Meals and Incidental Expenses (M&IE) Breakdown and a link to the Per Diem tool, which you can use to calculate trip allowances.
Rates are set each fiscal year, effective October 1 through September 30.
For travel to the lower 48 continental United States (CONUS) locations, the standard meal allowance (M&IE) ranges from $51 to $74 for 2016. However, higher rates apply in major cities and other high-cost locations designated by the government.
Incidental expenses (M&IE) include a limited number of incidentals, such as fees and tips for porters, baggage carriers, hotel maids, or room stewards.
In computing your meal allowance (M&IE) for business trips, you can apply the rates in effect for the fist nine months of the year to business trips in the last three months. You can use the first set of rates for the first nine months and the updated rates for the last three months.
Trips in the last three months:
For trips you took in the last three months of the calendar year (October, November, December), you have two options for applying the rates. Keep in mind, you must consistently use one of these options; you may not switch between options.
- Option1: Use the rates in effect for the first none months, or
- Option 2: Use the revised rates that took effect October 1