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Food and Entertainment Deduction
Scoring Tax Deductions with Food and Entertainment
Food and entertainment are great ways to have fun, but they can also be a good way to do business. As a freelancer or self-employed person, you might be thinking, can I deduct meals as a business expense? All types of self-employed people are eligible for business meal deductions, but not all meals are tax-deductible. To score tax deductions, you need to know what counts as a write-off.
Maybe you meet a client for dinner to discuss business or meet in a coffee shop to sign work documents. You could meet a potential client over sushi. These would all be eligible for a tax deduction.
The Internal Revenue Service (IRS) made some recent changes to the qualifications for business deductions, and this guide will discuss everything you need to know about writing off business meals, groceries and entertainment.
Table of contents
Can I deduct meals as a business expense?...Read more
Temporary changes for meal deductions...Read more
Can you write off groceries on taxes?...Read more
Can I write off concert tickets and other entertainment expenses?...Read more
So what’s not eligible for deductions?...Read more
Keeping track of expenses...Read more
Can I deduct meals as a business expense?
Let’s face it. We are social beings, and you can best strengthen relationships by sharing meals. Discussing business over a meal is a great way to build business relationships. Doing business over a meal can also be more convenient and help you accomplish your business goals in a shorter time.
But the question remains, as a freelancer or someone self-employed, can I deduct meals as a business expense?
The short answer is yes! But one important requirement is that a business associate is at the meal.
A business associate is someone who is involved with the business in some way. You can be a business associate for another company, or you may have business associates you do business with. In any case, meals between business associates are tax-deductible.
A freelancer, gig worker or self-employed person can write off meals and beverages locally or when traveling for business purposes. So, can you write off food on taxes? You sure can. ! And doing this will score tax savings! But trying to write off a fancy meal, such as a 10-course set menu, may raise some eyebrows with the IRS.
If your gig requires business meals, you can write them off as food and entertainment deductions. If you’re a food critic, food blogger or brand ambassador, for example, you can claim business meals as deductions because the meals relate directly to your business.
In 2021 and 2022, the IRS changed food and beverage deductions to be 100% tax deductible. Before 2021, business meals and company parties would count towards a 50% deduction. Let’s look at what qualifies for a 100% deduction and a 50% deduction for the IRS food and drinks tax deductible categories.
According to the IRS, businesses must purchase food for immediate use. The IRS would not consider businesses that sell packaged food as a restaurant. So convenience stores, drug stores, liquor stores, vending machines or grocery stores do not fall under the restaurant category for 100% deductions.
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Temporary changes for meal deductions
The Covid-19 Pandemic has left a lasting impact. The food and restaurant industry has been hit hard with lockdowns, staff shortages and limited seating capacities.
Businesses can now deduct 100% of the business meals if the meals come directly from the restaurant. The IRS made this change to help the food and beverage industry recover from pandemic hardships. When you dine-in or order take-out, you can deduct 100% of the expense if the purpose of the meal is business. Before 2021, there would only be a 50% deduction for these meals.
Now, if you order take-out from a restaurant for your office, this expense would be 100% deductible. If you order food from a grocery store for your office, this purchase would be eligible for a 50% deduction.
The change in meal deductions encourages business owners to support local restaurants on the rebound from the pandemic.
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Can you write off groceries on taxes?
The answer to can you write off food on taxes? should be clear now, but what about groceries? Are groceries tax deductible? Can I deduct groceries?
Generally, the IRS does not allow you to write off groceries and snacks since they are for personal needs. However, if you work in the food industry, and it’s necessary to buy groceries or ingredients as a part of your business, you can deduct groceries.
So, are groceries tax deductible? The answer is yes! But there’s a catch and groceries can only count as a write-off in some cases.
Food bloggers can claim groceries as business expenses if they need to try out and eat different food items for their blogs.
If you work as a cook, chef or baker and host a dinner party for your clients, you can deduct the cost of groceries and other food items since it’s directly related to your business.
When working as an Airbnb host, you may want to provide your guests with staples like milk, eggs, bread, etc. These can be considered business expenses and are deductible on Schedule C.
If you own a daycare or a childcare center, you can deduct the cost of the food that the children in your care eat.
Sometimes you can write off groceries if you have medical reasons to support it. You would need to have documentation from a doctor or healthcare provider.
For example, you may be able to deduct groceries for a particular weight-loss diet plan. To deduct the groceries for this, those groceries would need to:
Satisfy regular nutritional needs,
Alleviate or treat an illness
Be approved by a physician
Also, you can claim a business tax write off food deduction in two cases: if you buy food to donate to a food bank, or if you buy food to give to a charitable organization. Your deduction amount will be based on the market value for each donated item.
For example, if you buy a bag of rice for $10 at the grocery store and decide to donate it to the local food bank, you can deduct this charitable donation as a $10 write-off.
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Can I write off concert tickets and other entertainment expenses?
In previous years, you could deduct entertainment expenses for your business. After the 2018 Tax Cuts and Job Act, the IRS stopped all entertainment business tax write offs. As a result, many itemized deductions including golf outings, sporting events, concerts, theaters, and nightclubs are no longer tax-deductible.
You can still deduct food or beverage purchases at an entertainment event, but the sale must be separate and not on the same receipt as the event ticket.
Hosting clients on trips like hunting, fishing or even vacation is non-deductible. Going out on a yacht or a sailboat won't count either.
Renting or using an entertainment facility can’t be deducted for business purposes. This includes swimming pools, basketball courts, race tracks and airplanes.
Quick tip
An IRS rule change means entertainment-related expenses like tickets to a concert aren't deductible anymore, but you can deduct the cost of food at an entertainment event.
You can still deduct food or beverage purchases at an entertainment event, but the sale must be separate and not on the same receipt as the event ticket.
Hosting clients on trips like hunting, fishing or even vacation is non-deductible. Going out on a yacht or a sailboat won't count either.
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So what’s not eligible for deductions?
There are many ways you can deduct business-related expenses including meals and entertainment. But in some instances, you cannot make a deduction.
For example, if you pay for a client’s meal but aren’t present at the meal, this would not be eligible for the IRS food and drinks tax deductible requirement. Or, if you invite your spouse or friends to a business meal, their portion of the bill would be non-deductible.
It’s important to keep in mind that most entertainment events are not eligible for deductions. Also, any club fees, including sports clubs, golf clubs, country clubs, airline clubs and hotel clubs are not eligible. In addition, any transportation costs cannot count as a deduction.
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Keeping track of expenses
There’s nothing more annoying than sorting through and storing receipts. But surprisingly, it’s not necessary to hold onto every single receipt. In fact, the IRS will accept bank and credit card statements.
Still, it’s always good to have adequate evidence for your deductions if you get audited, like receipts, a digital calendar or an email thread. You can also provide an oral statement with the date, place, attendee names and bill amount.
There are some apps that can help keep track of your receipts and business expenses and find every possible deduction, so you don’t have to, saving you time and money.
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