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Maximizing Business Meal Deductions: Navigating the New Rules

Ameerah Morsy
October 17, 2023

Are you a business owner, self-employed, or running a side business? If so, you might wonder if you can deduct the cost of that celebratory dinner with your top client. Let’s break down the latest guidelines and offer some essential tips to help you make the most of your deductions:

1. Clarify it’s a Business Meal

In the past, small businesses could deduct 50 percent of both business meal and client entertainment costs. While the meal deduction remains, entertainment expenses are no longer deductible. The challenge lies in distinguishing between a business meal and client entertainment.

For example, if you regularly treat your top clients to dinner and tickets to sporting events, remember that the tickets aren’t deductible, but the meal might be. To ensure you qualify for the deduction, make it evident that the meal is primarily for business purposes.

2. Document Your Expenses

Maintaining a detailed business log for your meal expenses is the simplest way to meet IRS requirements. Include fields for the date, time, location, and cost of the meal. Additionally, list the names of all attendees, along with their company affiliations and professional titles. Don’t forget to provide a brief description of the specific business purpose, such as discussing new products and competitive pricing structures.

For the best defense of your deduction, frame the meeting’s purpose as something that could impact your business’s bottom line. Casual discussions about industry trends may not hold up under scrutiny during an audit.

3. Be Mindful of Luxury Dining

Deductions for lavish expenses related to meals and entertainment can be challenging to defend. If you’re engaging in a serious business discussion over dinner, opt for a restaurant that won’t result in an extravagant bill. Remember, business meals are still deductible, but ensuring proper documentation is essential. When done correctly, your deduction should withstand any potential audit.

By following these guidelines and keeping clear records, you can confidently navigate the rules surrounding business meal deductions and make the most of this valuable tax benefit.

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