If you’re traveling for business, you will likely have to eat at a restaurant at some point. If you can deduct the cost of your meal from your taxes as a business expense, you’ll enjoy the meal better. It is possible to deduct business meals, but there are specific guidelines that have to be followed.
As far as the IRS is concerned, no matter where you are you will need a meal. Because you can’t deduct meals you eat at home, you aren’t allowed to deduct every meal you eat while on a business trip either. The IRS does allow a 50% deduction of food expenses while traveling. There are two separate methods for deducting meal expenses: you either take a predetermined amount set by the IRS, or you can itemize your actual expenses.
Deducting Actual Costs
If you chose to deduct the actual cost of your meals, you have to keep records of each dollar you spend, including tax and tips. This includes meals taken to and from your destination, as well as those you’ve purchased while at your location. When you file your taxes, you can add up all your food expenses, and then divide by half to find the amount that is deductible.
If your business trip is combined with a personal vacation, then you are only able to count the meals you eat during business only, like when attending conferences or meetings.
You don’t have to keep all your receipts, but you need to be able to prove the meal was taken during business related work, so you should keep track of all your expenses.
Using Standard Method
If keeping track of each expense is too much work, you can opt to do the standard deduction method. The IRS allows you to deduct a set daily amount of food allowance for each day of your trip. Known as the standard meal allowance, it accounts for all of your meals, taxes, and tips.
The standard allowance varies depending on your destination. The deduction is based on what federal workers charge and is typically modest, but is revised each year.
If you chose to use the standard allowance for meals, you have to use it for all of your business trips. You can’t deduct some actual expenses, and then switch between methods. You have to choose one, regardless of the destination you are traveling to.
Because using the standard allowance often results in low deductions, it should only be used if you are traveling to low cost areas, or if keeping track of your actual expenses isn’t possible. No matter which method you chose, eating meals while on business can be quite tasty when you can get some of your cash back in taxes.