How to Deduct Meals and Entertainment Expenses

You can deduct the expenses paid for meals and entertainment with clients, as long as the meeting meets one of the following tests from the IRS:

Test 1: Directly-Related Test

-        Under this test, your expenses qualify if

1) the main purpose of the meeting was to conduct business,

2) you did engage in business during the meeting and

3) you have a general expectation of income or a benefit to arise from the meeting

 Test 2: Associated Test

-        Under this test, your meal/entertainment expense qualifies if the meeting is associated with a clear business purpose AND the meal/entertainment took place directly before or after a substantial business discussion.

 Generally, you are allowed to deduct 50% of your meal and entertainment expenses (100% in 2022), UNLESS you are reimbursed for the expenses. In this case, only the business that reimbursed you is able to take the deduction.

Best practice would be to keep a log handy to track your meal/entertainment expenses, and include the following details:

-        Who you met with

-        Where you ate or entertained

-        Date

-        Cost (WITH RECEIPT!!)

-        Brief description of the business purpose of the meeting

Remember, it’s always better to have more than enough info in case of an IRS audit, than not enough. Be thorough with your record keeping and save your receipts!!