The topic of business meal expenses and entertainment can be a lengthy discussion. In the context of business expenses, entertainment expenses (such as those related to amusement or recreation) are generally nondeductible unless they fall into specific exceptions. The 50% disallowance rule also limits the business deduction for certain otherwise deductible meals.
Here are some key points:
1. Business Meals Deduction:
- Business meals are generally deductible if the taxpayer proves a business connection.
- Meal expenses must be ordinary, necessary, and related to a business event.
- The meal cost should not be lavish or extravagant.
- Proper substantiation is required.
- A taxpayer or representative must be present.
2. Entertainment:
- Entertainment includes food or beverages provided during or at an entertainment activity.
- Food and beverage expenses may be excluded from otherwise disallowed entertainment under specific exceptions, such as:
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- Food and beverages for employees furnished on the business premises.
- Compensation to employees who received the benefit.
- Expenses incurred in connection with services for another person and reimbursed under an accountable plan.
- Recreational or social activities primarily benefiting non-highly compensated employees.
If you need further information, feel free to ask us at (512) 795-0300.
