Understanding Meals and Entertainment
At MJ Webb Bookkeeping, while we specialize in bookkeeping and not tax preparation, we often receive numerous questions regarding the deductibility of meals and entertainment expenses. With this in mind, as we approach the end of the year, it’s essential to clarify what types of meal and entertainment expenses are deductible in 2024, ensuring you’re well-informed and prepared for financial planning.
Guidelines on Deductible Meals and Entertainment Expenses
DEDUCTIBLE MEALS
50% Deductible: Typically, meals purchased for a business purpose (such as client or employee meetings or meals while traveling for business) are 50% deductible. This includes restaurant meals and catering for a business meeting.
100% Deductible: Some meals are fully deductible if they meet specific criteria, such as meals provided on the employer's premises for the convenience of the employer or food offered at office parties.
NON-DEDUCTIBLE EXPENSES
Entertainment Costs: All entertainment, amusement, or recreation expenses are no longer deductible, regardless of their association with business activities.
Extravagant or Lavish Meals: Expenses for meals that are lavish or extravagant under the circumstances are not deductible.
Non-business Meals: Meals during regular work hours or commuting that are not for a clear business purpose are also non-deductible, such as routine lunches or daily coffee breaks not involving business discussions.
DOCUMENTATION & RECORDKEEPING
Proper documentation is crucial for any deductible expense. Ensure to keep detailed records that include the amount, date, place, business purpose for the expense, and the business relationship of the individuals involved.
KEY CONSIDERATIONS
Ordinary and Necessary Rule: An expense must be both ordinary (common in your field of business) and necessary (helpful and appropriate for your business) to be considered deductible.
Direct Relation to Business: The meal must be directly related to the active conduct of your business.
As we near the close of the year, understanding these distinctions can help in planning your business expenses more effectively. At MJ Webb Bookkeeping, we specialize in expert bookkeeping for professional service providers and recommend consulting with a tax professional to ensure compliance with the latest regulations.
Our aim is to provide you with tax-ready financials and equip you with the necessary knowledge to manage your finances effectively. While we do not handle tax preparation directly, if you have any further questions or need clarification, the team at MJ Webb Bookkeeping is here to help!