Writing Off Eligible Meal and Entertainment Costs
A common expense business owners may be able to write-off are a portion of meals and entertainment costs. It’s an important tool to make sure you are minimizing your tax obligation. However, it can also be disastrous to get wrong (hello unexpected tax bill and penalties!) Always work with your accountant to make sure you are claiming items correctly.
In general, the maximum amount you can claim for meals and entertainment expenses is 50% of the either (whichever is less):
- the amount you incurred for the expenses; OR
- an amount that is reasonable in the circumstances.
For example, if you take a client out for dinner to discuss a project, you would typically be able to expense 50% of the bill – i.e., the portion of the bill that is allocated to your client’s meal.
These limits may not apply if any of the following are the case for your business:
- Your business regularly provides meals or entertainment to customers for compensation (e.g., restaurants, hotels)
- You specifically bill your client or customer for the meal and entertainment costs.
- You include the amount of the meal and entertainment expenses in an employee’s income or would include them if the employee did not work at a remote or special work location.
- You incur meal and entertainment expenses for an office party or similar event, and you invite all your employees from a particular location. (The limit is six such events per year though!)
- You incur meal and entertainment expenses for a fund-raising event that was mainly for the benefit of a registered charity.
In order to slash your taxes, consider what meal and entertainment expenses your business can claim. Stonehenge Accounting can help you determine how to do this to your best advantage.