In 2024, business meals are again 50% deductible with some exceptions below. Verify the meal qualifies and that you are keeping accurate records to substantiate them in case of an audit.

To qualify for the deduction:

1. The expense must be an ordinary and necessary cost incurred while conducting the business during the tax year.
2. The expense should not be extravagant or overly lavish considering the circumstances.
3. The taxpayer or an employee must be present when the food or beverages are provided.
4. The food and beverages must be offered to a current or potential business customer, client, consultant, or similar business contact.
5. If the food and beverages are provided during or alongside an entertainment activity, they must be purchased separately from the entertainment or clearly itemized on bills or receipts. The cost of food and beverages must not be inflated to avoid the disallowance of entertainment expenses.

Substantiation:

Meeting the requirements for claiming the deduction is crucial. Reasonable estimates are insufficient in case of an IRS audit. It’s necessary to document the amount spent, time and place, business purpose, and business relationship of individuals involved. Maintaining thorough and meticulous record-keeping procedures is essential to substantiate each business meal expense. For expenses exceeding $75, documentation such as receipts is mandatory. Meals must be broke out from entertainment expenses, which are not deductible. If meals are not broke out, then you cannot deduct anything for the meal portion, so request that it always be billed separately.

Exceptions to the 50% rule:

Meals included in employees wages, paid to an independent contractor or provided under federal law to crew members on certain commercial vessels or oil and gas platforms or drilling rigs are 100% deductible. Currently there is no exception for meals provided for the convenience or the employer or provided in an employer-operated eating facility which are 50% and under this will sunset on 12/31/25, at which time they will no longer be deductible.

Disclaimer: The information provided here is for general informational purposes only and should not be construed as legal or financial advice. Always consult with a qualified tax professional or advisor to discuss your specific situation and obtain advice tailored to your individual needs. The accuracy, completeness, and timeliness of the information cannot be guaranteed, and you should rely on professional guidance when making tax-related decisions.