Meal Expenses

DIY Bookkeeping Lesson No. 3

Meals expense is something else that is very important to understand when it comes to business deductions. Meals are only 50% deductible but that is not the main issue. The main issue when it comes to meals is that your meals have to be with a client in order for them to be deductible.

Sometimes small business owners think they can claim their lunches as a deduction when they go out by themselves or business colleagues. But this is not the case. In order for it to be deductible for the majority of small businesses it needs to show a business purpose which involves a meal with a client.

When you do have a business lunch or dinner with a client be sure to keep the receipt and write the purpose of the meeting on the receipt along with the client’s name. This will go a long way towards showing the IRS that it was with a client and that you are keeping good records.

Total these receipts on your monthly bookkeeping sheet as a separate category under expenses called Meals.  Also put them in your monthly envelope like you do all your other expense receipts.

As of 2018 entertainment is no longer allowed as a business expense. This article assumes that you have a very small business and will not be hosting large lunches or dinners for employees. But if you do have employees and want to spend money on them for a company dinner that meal is still not considered tax deductible by the IRS. For more information please read this article which includes a link to IRS Publication 463.