Meals and Entertainment Expenses

Meals and entertainment expenses are generally only 50% deductible, and provided the expenses are ordinary and necessary, have a business purpose and have proper documentation, there should be no issues surviving an IRS audit.

Did you know certain meals and entertainment expenses are 100% deductible? Yes, the law provides that the 50% limitation does not apply to the following:

• De minimus fringe benefits, and
• Certain recreational and social expenses benefiting employees other than highly compensated employees, officers and owners.

Beginning in 2013, individual income tax rates have increased. Thus, there are many benefits to reviewing your meals and entertainment policy and the recording of meals and entertainment expenses subject to the 50% vs. 100% deductibility.

For example, social meals and entertainment expenses including retirement functions, picnics and summer outings may be fully deductible.

Other fringe benefits may be fully deductible in which certain entertainment functions are made available (i.e., pool, golf course, etc.).

Employee(s) working overtime may qualify a meal to the 100% rule not subject to the 50% rule. Coffee and select meals served at work meetings with customers/clients as well as seminars and conferences may be classified to the 100% rule.

Any taxpayer with significant meals and entertainment expenses may want to review its accounting policy and procedures for 100% eligible meals and entertainment expenses. The tax savings can add up!

The chart below provides a good reference tool on proper classification for employee business events, out-of-town expenses and client meetings that may be 100% deductible and other M&E expenses that are 50% deductible. Please consult with your accounting firm and tax advisor to be sure your firm is properly classifying its meals and entertainment expense to maximize the deductible portion.

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Jacob Weichholz is a member of this newsletter's Board of Editors. He is a Principal at WithumSmith+Brown (WSB), CPA's and Consultants in their New York office. Jake has serviced and advised law firms of all sizes for over 30 years. He co-leads the New York office Law Firm practice of WSB. He can be reached at [email protected] or 212-829-3268.

Meals and entertainment expenses are generally only 50% deductible, and provided the expenses are ordinary and necessary, have a business purpose and have proper documentation, there should be no issues surviving an IRS audit.

Did you know certain meals and entertainment expenses are 100% deductible? Yes, the law provides that the 50% limitation does not apply to the following:

• De minimus fringe benefits, and
• Certain recreational and social expenses benefiting employees other than highly compensated employees, officers and owners.

Beginning in 2013, individual income tax rates have increased. Thus, there are many benefits to reviewing your meals and entertainment policy and the recording of meals and entertainment expenses subject to the 50% vs. 100% deductibility.

For example, social meals and entertainment expenses including retirement functions, picnics and summer outings may be fully deductible.

Other fringe benefits may be fully deductible in which certain entertainment functions are made available (i.e., pool, golf course, etc.).

Employee(s) working overtime may qualify a meal to the 100% rule not subject to the 50% rule. Coffee and select meals served at work meetings with customers/clients as well as seminars and conferences may be classified to the 100% rule.

Any taxpayer with significant meals and entertainment expenses may want to review its accounting policy and procedures for 100% eligible meals and entertainment expenses. The tax savings can add up!

The chart below provides a good reference tool on proper classification for employee business events, out-of-town expenses and client meetings that may be 100% deductible and other M&E expenses that are 50% deductible. Please consult with your accounting firm and tax advisor to be sure your firm is properly classifying its meals and entertainment expense to maximize the deductible portion.

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Jacob Weichholz is a member of this newsletter's Board of Editors. He is a Principal at WithumSmith+Brown (WSB), CPA's and Consultants in their New York office. Jake has serviced and advised law firms of all sizes for over 30 years. He co-leads the New York office Law Firm practice of WSB. He can be reached at [email protected] or 212-829-3268.