The tax rules governing business meal expenses are commonly considered a rude intrusion into the peaceful bookkeeping function of a small business. Complex income tax policies regarding business meals and entertainment render confounding frustration among entrepreneurs. An ebullient sentiment among business owners would exist is only their organizations could claim full tax deduction for any food or drinks consumed while working. Alas, wisdom cannot be mined from such simplicity.
Meal expenses are only tax-deductible if you travel away from home overnight for business or if a business discussion surrounds local meal consumption. If you travel for business, you should account for the meals as a distinctive total from the transportation and lodging. Only if you fasted while traveling does the entire trip count as travel expense. If you ate in the normal fashion, meals purchased are a separate bookkeeping entry.
Much to the disappointment of small business operators, buying coffee on the way to work is not a tax-deductible business expense. To legitimize this as a business meal, you must consume the beverage with a business associate – like a client or employee – and primarily have a business discussion over the cup of java. Keep a receipt on which you write the associate’s name and a brief note of the business matter discussed.
You may deduct as a business gift the cost of a ball game ticket given to a client, but going with him to the game or buying him drinks before the game is meal and entertainment expense. Business gifts have different tax rules than business meals and entertainment. You must account for these costs separately.
The Finance Writer 