Choose between two available methods for this deduction: the actual expense or standard meal allowance.
When you’re on the road, there’s nothing more enjoyable than a good meal. But the food will likely taste even better if you can deduct the cost from your taxes. Meal expenses incurred while travelling for business are partly deductible, but you must follow strict IRS rules.
The IRS figures that whether you’re at home or away on a business trip, you have to eat. Because home meals ordinarily aren’t deductible, the IRS won’t let you deduct all of your food expenses while traveling. Instead, you can deduct only 50% of your meal expenses while on a business trip. There are two ways to calculate your meal expense deduction: You can keep track of your actual expenses or use a daily rate set by the federal government.
What Is Business Travel?
You may only deduct your meal expenses while travelling for business. For tax purposes, business travel occurs when you travel away from your tax home overnight for your business. You don’t have to travel any set distance to get a travel expense deduction. However, you can’t take this deduction if you just spend the night in a motel across town. You must travel outside your city limits. If you don’t live in a city, you must go outside the general area where your business is located. You must stay away overnight or at least long enough to require a stop for sleep or rest.
Deducting Actual Meal Expenses
If you use the actual expense method, you must keep track of what you spend on meals (including tips and tax) en route to and at your business destination. When you do your taxes, you add these amounts together and deduct half of the total.
Example: Frank goes on a business trip from Santa Fe, New Mexico to Reno, Nevada. He gets there by car. On the way, he spends $200 for meals. While in Reno, he spends another $200. His total meal expense for the trip is $400. He may deduct half of this amount, or $200.
If you combine a business trip with a vacation, you may deduct only those meals you eat while on business—for example, meals you eat while attending business meetings or doing other business-related work.
You do not necessarily have to keep all your receipts for your business meals, but you need to keep careful track of what you spend, and you should be able to prove that the meal was for business.
Using the Standard Meal Allowance
When you use the actual expense method, you must keep track of what you spend for each meal, which can be a lot of work. So the IRS provides an alternative method of deducting meals: Instead of deducting your actual expenses, you can deduct a set amount for each day of your business trip. This amount is called the standard meal allowance. It covers your expenses for business meals, beverages, tax, and tips. The amount of the allowance varies depending on where and when you travel.
The standard meal allowance is based on what federal workers are allowed to charge for meals while traveling and is therefore relatively modest. The amount is revised each year. You can find the current rates for travel within the United States on the Internet at www.gsa.gov (look for the link to “Per Diem Rates”). You can also find it in IRS Publication 1542. The rates for foreign travel are set by the U.S. State Department and can be found at www.state.gov. When you look at these rate listings, you’ll see several categories of numbers. You want the “M & IE Rate”—short for meals and incidental expenses. Rates are also provided for lodging, but these don’t apply to nongovernmental travelers.
If you use the standard meal allowance, you must use it for all of the business trips you take during the year. You can’t use it for some trips and then use the actual expense method for others. For example, you can’t use the standard allowance when you go to an inexpensive destination and the actual expense method when you go to a pricey one.
Because the standard meal allowance is so small, it’s better to use it only if you travel exclusively to low-cost areas or if you are simply unable or unwilling to keep track of what you actually spend for meals.
To learn more about what you can deduct from business trips, see Nolo’s Travel Deductions area.
Business Meals With Customers
The Tax Cuts and Jobs Act (TCJA) eliminated all business deductions for “entertainment, amusement, or recreation.” (IRC Sec. 274(a).) There was concern that this meant that all business-related meals with customers would no longer be deductible under the TCJA. However, the IRS clarified that business-related meals are still 50% deductible as long as the meal and beverage costs are:
- “ordinary and necessary”
- incurred in the course of your business, and
- not lavish or extravagant under the circumstances. (IRS Notice 2018-76.)
The meal must be with current or potential customers, consultants, clients or similar business contacts and you (the business owner) or an employee must be present. For more information, see The Business Meal Deduction Under the Tax Cuts and Jobs Act.