Employee Meals Are Not Always 100% Deductible

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Company perks keep employees happy and somewhat encouraged to be productive. Occasional bonuses or functions make them feel apart of the team. And food is everyone’s favorite path to the heart. But business owners should be cautious to spend the business fortunes on employee meals as they are not always fully deductible during tax time. Businesses can deduct meals if necessary and related to rest during travel or are business-related entertainment.  Lavish or extravagant meals cannot be deducted but the IRS does not provide a dollar amount to assess this value.

Limits on Meals

Travel and client meals are subject to a 50% limit for tax deduction. Office meetings with employees where food is provided also results in a 50% limitation unless the food is available to more than half the staff. Then it becomes 100% deductible. Company events, picnics and holiday parties are also 100% deductible. Further exemptions to the 50% limit are extended for offshore operations and other situations described by IRS Publication No. 535, Business Expenses.


Understanding which meals are subject to the 50% limitation will help small businesses with tax planning. It will also develop more conscious spending habits. As tempting as it can be to feast when business is good, holding back to avoid paying taxes on half the expenses will be a long-term benefit.

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