If you work in certain occupations, the Internal Revenue Service lets you make deductions for meals that are conducted as a normal part of your business. However, there are strict rules about what constitutes a business meal. For example, eating a meal while you discuss a business deal on the phone with a client is not a deductible business meal expense. On the other hand, taking a client out for drinks at a hotel bar, or for dinner at a swanky restaurant would be an eligible business expense, as would eating a meal while you’re traveling away on a business trip.
The IRS doesn’t specifically have a rule regarding the distance involved when it comes to deducting business means. However, the IRS allows you to deduct meals under one of the following two conditions: You have to stop to sleep or rest to properly perform your work while traveling away from home on business, or the meal you deduct is part of business-related entertainment. If either of these two conditions is met, you can deduct business meals regardless of the distance you traveled away from home on business. The only exception is that if your business travel will keep you away from home for 12 months or longer, you can’t deduct your business meals because the IRS considers your business home to be your tax home.
Not every meal that you eat during the course of business travel or during the course of conducting business for your employer is deductible. The IRS doesn’t allow you to deduct meals that it defines as extravagant, which are meals that are not reasonable based on the facts and circumstances. However, the IRS will not disallow a meal deduction simply because that meal was eaten at an expensive restaurant. One example of a meal that wouldn’t qualify for a deduction would be a situation in which you traveled out of state on business, and met up with an old friend. If you took that friend out to dinner, you couldn’t deduct that meal as a business expense because the purpose of that meal was recreational.
The IRS lets you deduct your business meal expenses by what it terms “actual cost,” or by “the standard meal allowance.” Actual cost refers to the amount you paid for a meal, and the standard meal allowance is a federal rate that is set by the General Services Administration. However, regardless of the method you choose, you can only deduct 50 percent of the cost of your meals. You can visit the GSA website in the Resources to find the allowance rate for your state. In 2017. the rate for most states was $51 per day.
