Key takeaways
- Know what’s deductible and what’s not: Knowing the current deductions can help you better plan for business expenses. For example, business meals are generally 50% deductible when tied to business discussions, whereas entertainment expenses, such as sports tickets, are no longer deductible under current IRS rules.
- Travel costs can offer full deductions: Transportation and lodging for business trips are 100% deductible if they’re not lavish and extravagant, but spouse travel and investment seminar travel expenses are not deductible.
- Documentation is critical: Keep detailed, contemporaneous records of time, place, attendees and business purpose to substantiate deductions.
Not all business takes place in the office or boardroom. That’s why Congress allows a percentage of business meals, entertainment and travel costs to be deductible.
To get the maximum tax benefit — and avoid surprises during filing — business owners need to carefully review the current deductibility percentages and rules.
Business travel, meals and entertainment tax deduction
Here’s an overview of the available tax deductions for business meals, entertainment and travel:
Business meals expense
| Deductible | Additional comments | |
|---|---|---|
| Lavish and extravagant meal | 0% | |
| Meal with employee, business discussed | 50% | |
| Meal with employee, no business discussed | 0% | |
| Meal with customer, business discussed | 50% | |
| Meal with customer, no business discussed | 0% | |
| Meal with customer on a business trip, no business discussed: Customer’s meal | 0% | |
| Meal with customer on a business trip, no business discussed: Your meal | 50% | |
| Meal for customer and spouse, no one else present | 0% | |
| Transportation to/from restaurant for business meal | 100% | |
| Dinner for employees working overtime (if deemed de minimis) | 50% | 50% deductible through 2025, 0% starting in 2026 |
| Meal ordered in for staff meeting (if deemed de minimis) | 50% | 50% deductible through 2025, 0% starting in 2026 |
| Meals provided at or near cost to employees at employer-operated cafeteria | 50% |
50% deductible through 2025, 0% starting in 2026 (Certain fish processing facilities and fishing boats remain 100% deductible.)
Meals remain deductible if they are sold by the taxpayer in a bona fide transaction for full consideration, or if provided on certain fishing vessels or processing plants. |
| Company holiday parties and picnics for employees | 100% | |
| Cost of meals provided to employees for convenience of employer on the premises | 50% | 50% deductible through 2025, 0% starting in 2026. (Certain fish processing facilities and fishing boats remain 100% deductible. Meals provided to restaurant or catering employees at the worksite also remain 100% deductible.) |
| Meals taken while away from home (employees only) | 50% | Must meet IRS “away from home” rules. |
| Snacks and beverages provided to employees on premises (if deemed de minimis) | 50% | 50% deductible through 2025, 0% starting in 2026 if provided at or from an employer-operated eating facility. Snacks that do not rise to the level of meals and which are not associated with an employer-operated eating facility remain 50% deductible in 2026. |
| Meals provided at board of directors business meeting | 50% | |
| Meals provided at entertainment facility if separately stated on invoice | 50% | For example, food and beverages consumed in a suite at a sporting facility are 50% deductible if separately stated/invoiced. |
Business entertainment expense
| Deductible | Additional comments | |
|---|---|---|
| Transportation to/from sporting event | 100% | No deduction for parking at events. Transportation deduction limited to employee recreation exception, certain charitable transportation costs and transportation included in employee compensation. |
| Ticket price and scalper’s premium for sporting event | 0% | |
| Cover charge, taxes and tips | 0% | |
| Country and luncheon club dues and fees | 0% | |
| Tickets for charitable fundraising sports event | 0% | If the ticket price exceeds the fair market value of the event, the charity should provide an acknowledgement that identifies the portion that’s deductible as a charitable contribution. |
| Charitable contribution in exchange for the right to purchase tickets to sporting events | 0% |
Business travel expense
| Deductible | Additional comments | |
|---|---|---|
| Transportation and lodging expenses for a business trip | 100% | Provided not lavish or extravagant |
| Transportation, lodging and attendance expenses for investment seminar | 0% | No longer deductible on Schedule A |
| Travel for charitable purposes | 100% | Must be directly related to a charitable purpose, and individual taxpayer must itemize |
| Nonemployee spouse’s travel costs | 0% | |
| Employee spouse’s travel costs | 0% |
How to benefit from business meal, entertainment and travel deductions
To benefit from the tax deduction, business owners should consider:
- Keeping accurate records of their business events: While records can be produced after the fact, the IRS gives more credence to contemporaneous records. Written or electronic evidence is better substantiation for the IRS than “oral history.” In general, records should indicate time, place, amount, persons attending and business purposes.
- Plan for deductible expenses: Review what is and is not deductible when scheduling client meetings and hosting employee events. For example, some entertainment expenses (like sports tickets) are not deductible, but meals and travel for events may be.
FAQ
Navigating IRS rules on business deductions can be confusing, especially when it comes to meals, entertainment and travel. Here are answers to some common questions that can help you stay compliant and make the most of your allowable deductions:
Can I deduct my meals if I’m self-employed?
Yes, you can deduct meals if you are self-employed, provided the meal is directly related to your business. For example, meeting a client or traveling for work qualifies. Personal meals are not deductible.
When are meals 100% deductible?
Meals are 100% deductible only in specific cases, such as company holiday parties and picnics for employees.
How much can I deduct for meals without receipts?
You can use the per diem method for deducting travel-related meals without receipts. The IRS sets daily rates based on location. For non-travel meals, you need documentation. There’s no flat deduction without records.
Does the IRS require itemized receipts for meals?
The IRS requires itemized receipts for meals if the expenses exceed $75. The receipt should show the restaurant name, date, amount, and ideally the attendees and business purpose. For expenses under $75, you still need to document the business purpose.
Is entertainment tax deductible?
No. The Tax Cuts and Jobs Act eliminated deductions for entertainment business expenses. However, meals during entertainment events may still be 50% deductible if properly documented, and travel to and from sporting events may be 100% deductible.
Wipfli takes a proactive and comprehensive approach to your tax plan, so that you can take advantage of every opportunity. Reach out to our tax specialists today to learn how we can help you maximize your planning.
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