The Fun Stuff: Meals, and Entertainment

Meals & Entertainment Deductions

Food! Everyone likes food, right? When it comes to food and celebrating, there are some recent changes that you need to be aware of (and they aren’t the greatest). But before we get to that, let’s start off with the good news.

100% Meals Deductions, for When Everyone Gets a Slice!

If you have a company party and serve a meal at that company party using the company’s money, then good news! As long as the meal is for everybody in the company and not just the office workers or just you and your friend Jim Beam, the expense is 100% deductible.

Don’t worry if someone is out sick or has to stay on the phone lines during the party; just be a good boss and save them a slice for later. In fact, a good visual for 100% meals deductions is a pizza party.

Please note: you can’t be a big ol’ Scrooge and charge your employees for the food if you want the expense to be 100% deductible. If you’re having the party at a place that serves alcohol, then you can definitely require employees to purchase their own drinks while providing food for free, or set a dollar limit for drinks, etc. Just treat everyone equally, out of the goodness of your heart, but also because it’s the law.

So just remember: if it’s for 100% of your employees, then you can probably deduct 100% of it.

50% Meals Deductions: Special Situations

If the meal is not for everybody, then the best deduction you can get is 50%, and that’s only if the meal meets one of these other criteria:

  • The employee(s) are in a situation where eating their own food is impractical because they’re:
    • Traveling
    • Having a not-lavish meal with a client
    • At a conference
    • Working late
    • At a board meeting
  • You’re feeding several employees but not enough to qualify for 100% meals. The visual for this is probably burgers — it’s expensive to feed a whole company burgers, but not too expensive to feed a group or perhaps a whole department burgers. Feel free to visualize veggie burgers if you like.

If you’ve been running your company for a while, please notice that the last item above (office meals that are not company wide) used to be 100% deductible but is no longer. That’s the first item of bad news.

What If I Am the Only Employee?

I know what you are thinking: you are the only employee and you are at work, ordering lunch. That is deductible, right? No go. Your daily lunch is a normal meal expense and it is not deductible. It is not ordinary and necessary for the running of the business. You have to eat; it doesn’t matter that you are running a business while doing it.

Entertainment Expenses: Watch Out for the Fun Police!

Entertainment used to be an expense that businesses could deduct at 50% as long as it met the same kinds of criteria for 50% meals. But that is no longer true. That’s right: we’ve gotten to the second bad news part of the story.

No more golf with clients, baseball games, or Disney on Ice (or was that just me?). That’s right, no more entertainment for anyone. A good visualization for entertainment expense is now a grumpy judge slamming down a gavel in a grumpy fashion in a very echoey courtroom.

Sure, you can still take your clients out to entertainment if you want, but understand that it’s coming entirely out of your own pocket money.

TL;DR: When it comes to food, be inclusive — office parties are great for morale and the food is 100% deductible. If you have employees that are working outside the norm for you in some way, chances are good that you can deduct their meals at 50%. On the flip side, remember that the fun police have taken away all deductions for entertainment expenses.

P.S. Want to learn how to manage your money better as a therapist? Now you can learn directly from Toni Cameron, CPA with our new on-demand webinars! Check out our most popular webinars here.
Khaled - TLDR

Khaled Albadawi, CPA

Principal & CEO

Khaled joined TL;DR as Principal in December of 2022, and has quickly hit the ground running offering a fresh new perspective for the TL;DR team and clients. He’s a natural entrepreneur & leader, starting his days at 4 AM with a nice cup of coffee to get a jumpstart on projects before the business world wakes up. His one piece of advice to business owners? Ask yourself if you are creating just another job or a business. Ideally, you should be building something that doesn’t require you to be there 40 hours a week!

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