In 2024, businesses can still deduct 50% of the cost of business-related meals. The temporary 100% deduction that applied in 2021 and 2022 is no longer available, so it’s back to the usual rules. If you’re a business owner looking to cut down on business expenses, understanding these deductions is key.
To qualify for the deduction, the business owner or an employee must be present when the food or beverages are served. And keep in mind, the expense can’t be lavish or extravagant. The IRS defines a restaurant as a business that prepares and sells food or beverages to retail customers for immediate consumption, whether on or off the premises.
What's Excluded?
Meals bought at grocery stores, convenience stores, or any place that mainly sells pre-packaged goods don’t count. Even if your company operates an eating facility, it might not qualify as a restaurant, especially if it’s run by a third party under contract.
And remember, meals for personal reasons, even while traveling, aren’t deductible. However, if you’re on a business trip, most meal expenses can be classified as business costs, provided the trip is primarily for business purposes. If the trip is mainly personal, only those expenses directly related to the business activity are deductible.
How to Qualify?
Starting in 2024, your business can generally deduct 50% of the cost of business meals if:
- ✅ The business owner or employee is present.
- ✅ The meal cost isn’t “lavish or extravagant.”
- ✅ The meal involves a business contact, such as a customer, employee, vendor, or consultant.
- ✅ The meal has an “ordinary and necessary” business purpose.
Remember, entertainment expenses aren’t deductible, so if you’re at a sporting event, for instance, you can only deduct the meal costs if they’re billed separately, like a catered meal delivered to a skybox.
For more details on these rules, including recordkeeping requirements for business meals, check out IRS Publication 463, Travel, Gift, and Car Expenses.
Need Help?
Struggling to navigate the maze of meal and entertainment deductions for your business? Contact us today. We’re here to help you trim down your business costs and keep more money in your pocket—legally. Let’s make your 2024 tax season a breeze!