‘I want to deduct all my meals, oh and please don’t forget coffee “. All tax professionals hear this way too often. But truth is: NO, you cannot deduct your coffee or lunch or dinner. Generally, tho cost of meals considered a personal expense and are not deductible, unless substantial amount of business discussion happened before, during or after a meal, or you expect to receive a business benefit by providing a meal.
According to IRS Publication 463, these tests have to met in order to take a deduction:
- The main purpose of the combined business and entertainment was the active conduct of business,
- You did engage in business with the person during the entertainment period,
- You had more than a general expectation of getting income or some other specific business benefit at some future time, and
- Meal can happen directly before or after a substantial business discussion
In general, meals are deductible at 50%, by both employees and independent contractors. Pilots, flight crews, interstate truck drivers, railroad employees, merchant mariners, and other transportation industry workers can deduct 80% of the unreimbursed meal expenses.
Employers can deduct some meals at 100% such as employer sponsored holiday party or a lunch for employees
However there are some meals that are not deductible at all- lavish and extravagant, as they are not ordinary, necessary and reasonable .