Meal and Entertainment Expenses

As a small business owner, you may find yourself in the position of having to entertain clients or customers. While this is often a business necessity, the costs can really add up. You'll be glad to know that the IRS allows you to take a deduction for 50 percent of the qualifying business entertainment expenses for yourself and your guests.

What requirements do your meal and entertainment expenses need to meet in order to be deductible? Generally, the answer is that you can deduct ordinary and necessary expenses to entertain a customer or client if:

• Your expenses are of a type that qualifies as meals or entertainment.
• Your expenses bear the necessary relationship to your business activities.
• You keep adequate records and can substantiate the expenses.

Claiming meals and entertainment expenses. Your total meals and entertainment expenses would be reported on Line 24b of the Schedule C. This amount should include any meal expenses you incurred while traveling on business. You cannot deduct the cost of a meal as an entertainment expense and as a travel expense.

Generally, you are allowed to deduct 50 percent of meals expenses. Although, some individuals subject to Department of Transportation hours of service limits rules are allowed to deduct 80 percent.