Meals During Business Travel

• Expensive meals may be a reasonable tax deduction.lobster image by Zlata from Fotolia.com
  
  The Internal Revenue Service allows up to 50 percent of the cost of meals, including tax and tips, to be deducted as a business travel expense when you are required to be away from home on business. No dollar limit on these meals is provided. Instead, the IRS states deductions are allowable as long as the expense is reasonable based on the facts and circumstances of your travel and the establishment chosen. Taxpayers can either use the actual cost of meals to determine the deduction, or in certain circumstances a standard meal allowance can be used as a deduction. The IRS standard meal allowance deduction is $46 per day for smaller locations.
  
  

Employer Reimbursed Travel

• Deductions may not be allowed if your employer already reimburses you.Pay Stub image by Haris Rauf from Fotolia.com
  
  An exception to the 50 percent meal reimbursement is when an employer provides some form of travel or meal reimbursement to an employee. The amount deductible is dependent on how your employer accounts for the reimbursement, and how much is actually reimbursed. If an employer provides 100 percent reimbursement, then no deduction is allowed. If meal expenses can be deducted, taxpayers must complete IRS 2106, which calculates the amount of expenses deductible. Please note that in addition, employee meal deductions may be subject to the employee business expense limit of two percent of taxpayer adjusted gross income.
  
  

Entertainment Meals

• Server tips for allowable meals are tax deductible.tip plate image by Tanja-Tiziana Burdi from Fotolia.com
  
  Meals provided to employees, clients and customers are deductible entertainment expenses if the meal has a business related purpose, is a reasonable cost considering business circumstances and is attended by the taxpayer or their employee. The cost can include food, beverages, tax and tips. If the meal is for a personal entertainment meal that does not have a business-related purpose, the meal is not deductible. Generally, 50 percent of entertainment meal expenses are deductible.
  
  

Entertainment Meal Deduction Tests

• Business meetings over dinner must include more than the hope of future income.money dinner image by Kirill Kurashov from Fotolia.com
  
  Entertainment expenses must meet one of two tests in order to be allowed as a tax deduction. The directly related test states that in order to be deductible the main purpose of the entertainment meal was to conduct business, business was discussed during the meal and there was a valid business dealing other than the expectation of receiving future income or some other business benefit. The associated test states that in order to be deductible a meal must be associated with your trade or business, that business was conducted directly before or after your meal. Generally, 50 percent of unreimbursed entertainment expenses can be deducted.