Many small business owners are too aware of the 50% limitation to deduct business. There are exceptions that allow for a 100% deduction of business meals that should not be overlooked:
Office Snack & Drinks. Employers can deduct 100% of the cost of providing employees with free coffee, soft drinks, donuts, snacks, etc. consumed on the business premises.
Company Parties. Employers can deduct the full cost of providing food and beverages at company outings primarily for the benefit of certain employees. Examples include holiday parties or summer picnics.
Meals Served on Company Premises. Employers may provide employees with meals at work and claim a full deduction (and employees do not have to report the value of the meals as income!). Meals must be provided for the employerâ€™s convenience, a challenging rule.Â
Promotional Activities Available To The General Public. Meals open to the general public are 100% deductible. Examples include free food at a trade show, seminar, or exhibit, an open house at the place of business, as an advertising gimmick to draw customers. Liquor or wine may be included.
Charitable Sporting Events. Tickets or packages involving sporting events are fully deductible even if a meal is included. To qualify, the event must give 100% of its net proceeds to a registered charity and is staffed primarily by volunteers. The classic example is a charity golf tournament with a meal provided as part of the deal.
Everybody likes a good soiree. For a soiree to even be deductible under the 50% rules, one must conduct business before, during or after the event. To achieve a 100% write-off, it is critical to carefully plan and document expenditures using the rules above.
By following the rules, the small business owner can build goodwill for the business AND deduct ALL the costs!