Employee Meals: 50 or 100 Percent Deductible?

Your business tax return could look a lot different depending on the circumstances of employee meals. Find out why and what you can do to get the most bang for your tax buck.

Everyone loves a free meal – especially employees. However, your business tax return will be affected differently depending on the circumstances of the mealtime experience.

While you can generally deduct only half the cost of meals related to your business activities, the tax code includes specific exceptions that allow a deduction of 100 percent of what you spend on food and beverages in certain situations. Here are three examples:

• Social gatherings and parties. That once-a-year holiday party qualifies for 100 percent deductibility as long as it is primarily for the benefit of all your employees.

• Food with nominal cost. Do you supply morning-meeting donuts, meals for overtime work or special occasion treats for your staff? “De minimis” employee benefits — those small items your business pays for that are not considered taxable income to your employees— are typically 100 percent deductible.

• Employees on emergency calls. If you provide food for your employees during working hours so they can be available for emergency calls, the meals wil detailed records to substantiate your deductions for meals and food served under these exceptions.

Remember that you’ll still need to keep detailed records to substantiate your deductions for meals and food served under these exceptions.

We’ll be happy to help you review your expenses and set up a system to account for items that qualify for a more generous deduction.

We help business owners not only with business tax deductions, but also proactive business tax planning strategies. We are an established CPA firm based in Austin, Texas and work with growing businesses across the country. If you need assistance visit Tax Services, and contact us.

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