In general, meals are deductible when incurred for business or for the production of income. This means you can deduct meals from your gross revenue as a legitimate cost of doing business if the meals are business related. In other words, the meals should be part of a business meeting.
- 50 % limitation: only half of what you spend is deductible.
- No deduction for country club dues – i.e. a club organized for pleasure, recreation or other social purpose. Even though a great deal of business is transacted on the golf course, you’ll have to pay for the membership dues out of taxable revenue.
Dues paid for memberships in business leagues, trade associations, Chambers of Commerce, boards of trade, real estate boards, professional organizations, and civic or public service organizations are deductible unless the principal purpose is to conduct entertainment activities. The Rotary, Lions, and Kiwanis are good. However the HaHa club is not.
The following meals are 100 percent deductible:
- Dinner for employees working overtime.
- Lunch ordered in for a staff meeting.
- Meals ordered by employees or owners and invoiced to a customer.
- Occasional cocktail parties, group meals or picnics for employees and their guests.
- Traditional birthday and holiday gifts of property (not cash).
- Coffee, donuts and soft drinks.
- Fruit provided on account of illness, outstanding performance or family crisis.