Mimosas or Mileage? What Counts as a Legit Business Brunch

We’ve all been with that person who says, “I sell ____, there, we’ve talked about business, so I can write this off” over a tasty brunch. But just how legit is that? Can you really deduct a meal from your taxes and what happens if you do when you shouldn’t?

Today we’re looking at meal deductions and what you need to know about them.

Eggs Over Easy, Taxes Over Complicated

The general tax rule for meal write-off is that the meal must be ordinary, necessary, and related directly to your business. I’ll go a little more into that in the next section, but keep this in mind when planning a meal out with employees or business partners.

In the U.S., you are usually allowed to deduct 50% of the cost of a qualifying meal. This includes food, drinks, taxes, and the tip. Remember that a lunch where you just discussed work is not an automatic dedication.

From Toast to Tax Deduction

So, when do meals count for a tax deduction? We saw the rules earlier, but let’s dive in a little deeper.

First, your meal must have a clear business purpose. If you’re meeting with a partner to discuss a project, taking a client to lunch to work out a deal, or similar, it can be written off. However, who is at the table also matters . . . they need to be directly related to work. That means a supplier, employee, business partner, or client, not your best friend from high school.

Document it all, too. If eating and meeting is your game plan, make sure you have a file where you note the date of any meals, plus details like who attended and what you discussed or did.

Finally, stick to reasonable restaurants. Sometimes, you might need to impress a new client, but if you’re taking 20 people for caviar and champagne at a high end bar, the IRS might see some red flags.

Sorry, Champagne with Your Cousin Doesn’t Qualify

Now you know what counts, it’s time to consider whether you’ve been using this tax perk properly.

A social catch-up with friends or family cannot be deducted, even if you have been talking shop for a few minutes. The same goes for solo eating out unless you have a legit business reason. For example, if you are at a conference related to work and eat lunch while there, this would count as a good reason.

Grabbing a burrito at the local food truck? If you can’t document the expense with a proper receipt, you’re out of luck. You need receipts!

Receipts Are the Real Main Course

Want to stay audit-proof? Well, no one can guarantee you’ll never get audited, but you’ll greatly reduce red flags if you do things properly. Keep those receipts and record all meeting details immediately after the meeting. It’s also helpful to use a dedicated business credit or debit card so the paper trail is easy to follow.

If you’re wondering whether or not your expenses count for deductions, contact Ask Anna Tax. I’ll help you figure things out and make sure you’re not throwing up red flags for the IRS.