Normally, meals and entertainment expenses are subject to a 50% limitation. This means that only 50% of these expenses are allowed as a deduction on your tax return. However, there are some meals and entertainment expenses that are 100% deductible.
What Types of Meals and Entertainment Expenses Are 100% Deductible?
The following types of expenses are 100% deductible:
- Expenses for services, goods, and facilities that are treated as wages to the recipient;
- Reimbursed expenses when the services for which reimbursement is made are performed for the employer and are not treated as wages to the recipient;
- Recreational expenses primarily for employees who are not highly compensated (e.g. company picnic);
- Cost of goods, services, and facilities made available to the public;
- Entertainment sold to customers in a bona fide transaction for adequate consideration (i.e., sold for money)
- Goods, services, and facilities that are given to nonemployees as entertainment, amusement, or recreation expenses and that are includible in the recipient's income;
- Food and beverage expenses that are excludible from the recipient's income as de minimis fringe benefits;
- The cost of a ticket package to a sporting event and related expenses if the event is organized to benefit a tax-exempt organization, all net proceeds of the event are contributed to such organization, and volunteers perform substantially all of the work in carrying out the event; and
- Employee's meal expenses incurred while moving that are reimbursed by the employer and includible in the employee¿s gross income.
Do These Expenses Need to Be Substantiated?
Yes. Although these expenses are 100% deductible, supporting evidence must be available to prove that these expenses were actually incurred in order for them to be deducted on the taxpayer's tax return.
Do I Need an Attorney to Help Me with My Tax Problems?
Tax laws are complex and ever-changing. While there are various tax preparation programs available to assist you in filing your returns, they cannot provide the same level of service that an experienced and knowledgeable tax attorney can provide. If you are unsure about the characterization of your expenses or you need someone to represent you before the IRS, a tax attorney can help you.