Overview of IRS tax rules for qualified business meals and entertainment expenses
In 2021 and 2022, a 100% business meal deduction was temporarily put in place by the IRS in an effort to support restaurants impacted by COVID. Unfortunately, the 100% meal deduction sunset for 2023. However, there are still significant business meal tax saving opportunities for 2023.
Following is an overview of the meals and entertainment deduction changes, IRS rules regarding the deductions, and recordkeeping tips.
Deductible Business Meals for 2023
50% Deductible
- Business meals with clients
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- The meal must have a business purpose to be deductible.
- Food items for the office
- Meals while traveling for work or training
- Meals at a conference
100% Deductible
- Food and beverages for company holiday parties
- Food and beverages given to the public
- Dinner for employees working late at the office
- The meal is deductible if it is on the employer’s premises; remote work from home does not qualify, and
- Meal is outside of normal business hours of employer
Are there any business entertainment expenses that qualify for a deduction?
The following business entertainment expenses may still be tax deductible in 2023:
- Expenses for company activities like a holiday party, rewards trip; or costs tied to professional association business meetings or conferences
- For companies that sell entertainment to their customers, there are exceptions to the entertainment deductions.
- For example, a restaurant /bar/music venue pays a band to perform for customers.
Meal expense recordkeeping tips for 2024
For meals totaling over $75
The IRS requires businesses to keep receipts or documentation of the meal expense.
For meals under $75
The IRS has no specific requirement to keep receipts to document the expense.
Best Practice
Businesses should keep a record of all deductible meals. The following information should be captured for recordkeeping:
- Date of the meal
- Total including tax and tip
- Name of the restaurant
- Details of the business meal (who attended and how it related to your business).
If you have any questions, please reach out to your Keiter Opportunity Advisor or call 804.747.0000
About the Authors
Jen applies her significant experience in tax compliance and strategic consulting for both privately held businesses and their owners. She works to minimize tax and maximize wealth while managing liability and risk. Her expertise also includes tax accruals, mergers and acquisitions, multi-state tax issues, audit controversy and executive compensation.
Jen is a lead partner of Keiter’s Family, Executive, and Entrepreneur Advisory Services Team.
Mike is a Director at Keiter. Mike’s clients benefit from his 48 years of experience and tax insights. His consulting clients include closely-held businesses in the real estate, home building, manufacturing, construction, retail and wholesale industries. He also serves many estates, trusts and foundations.
The information contained within this article is provided for informational purposes only and is current as of the date published. Online readers are advised not to act upon this information without seeking the service of a professional accountant, as this article is not a substitute for obtaining accounting, tax, or financial advice from a professional accountant.
