chevron_right

R.15 Special Requirements to Substantiate Business Meals Expenses

You may take a deduction for a business meal if the primary purpose of the meal is to conduct business or further some purpose of the business.

You may take a deduction for meals eaten while traveling away from your “tax home.”

You must be able to substantiate the business purpose of the meal.

You may compensate your employees for their meals and incidental expenses when they are away from your tax home, traveling for you on work.

Provided you have written documentation showing the business purpose of the trip and the date and place of the trip, you do not need to include the value of the payment to the employee in their taxable W-2 wages or pay payroll taxes on that amount.

Business meals deductions are limited to 50% of the actual amount or the amount on the GSA table.

For your own meals and incidental while traveling away from home you have a choice similar to the one for vehicle expense: Actual or Per Diem Rates from the GSA Table.

To use the Actual Method you must have your actual receipt along with a notation explaining the business purpose of the trip.

To use the Per Diem Method you do not need to keep any receipts, but you do need to maintain written records explaining the business purpose of the trip. You calculate the amount of the deduction using the Per Diem Rates Table published at least annually by the General Services Administration (GSA) of the federal government. Look up the city that is your destination. If the city is not listed, use the amount listed for the county.

Business meals deductions are limited to 50% - if you look on the IRS form you see the line you enter 100% and then you subtract 50% to arrive at your actual deduction.

Note that the GSA tables include hotel expenses. A self employed person may not use the GSA tables for hotel expenses; you have to have actual hotel receipts. Use the "Meals and Incidentals" part of the table only.

"Incidentals" is for things like buying aspirin or sunscreen you may have forgotten to take with you but later realize you need.

This resource is derived from materials developed by the University of Arkansas School of Law Agricultural Tax Training as part of the Agricultural Financial, Tax and Asset Protection (AgFTAP) partnership with the University of Arkansas Southern Risk Management Education Center and others.

2.3.3 Special requirements to substantiate business meals that are 100% deductible

If you provide meals to employees for YOUR convenience (yours not theirs) then those meals are 100% deductible (not subject to the 50% limitation).

Further, the value of the meals provided to your employees is not included in their taxable wages.

You must be able to document that the meals were provided for your convenience.

An example of appropriate documentation would be including in your employee policy manual the requirement that employees eat meals with the farm/ranch crew so they can be close-by for emergencies, or because town is too far away, or in some cases as part of them understanding how the food grown or raised in the farm is prepared and served and how it tastes.

Examples of when the meal is for your convenience if: It is provided at your place of business, it enables the employees to work overtime, you are far from a place where your employees could reasonably leave, go buy a meal and return within the time allotted for a lunch or dinner break, you provide the meals to enable the employees to be close by for emergencies.

Examples of when the meal is not for your convenience: You provide meals in order to increase overall employee compensation, the meals are provided when the employees are not working.