Can Nonprofit Meal Expenses Be Deducted?

Nonprofit organizations often incur meal expenses for staff, volunteers, and events. Determining whether these costs can be deducted is essential for tax compliance and sound financial management. Some meal expenses are allowable, while others may not qualify depending on the circumstances.

Accurate documentation and proper allocation of these costs ensure compliance with IRS regulations and prevent potential issues. Keeping detailed records and following guidelines helps maintain financial transparency.

Allowable Meal Purchases

Nonprofits can cover meal expenses when they serve a legitimate business purpose. Meals provided during training sessions, board meetings, or community outreach programs are generally permissible under the Internal Revenue Code, as long as they are not considered lavish or extravagant.

For instance, if a nonprofit hosts a financial literacy workshop for low-income families and provides lunch, the cost is typically a valid program expense. Similarly, if employees work late on a grant proposal supporting the nonprofit’s mission, providing dinner may be justified. However, routine staff lunches or meals primarily for social purposes are unlikely to qualify.

For travel-related meals, the IRS allows reasonable expenses when employees or board members attend conferences directly related to the nonprofit’s mission. The General Services Administration (GSA) sets per diem rates that vary by location. In 2024, the per diem meal rate for New York City is $79 per day, while smaller cities have lower rates.

Documentation for Meal Costs

Thorough records ensure compliance with IRS regulations and substantiate meal expenses if questioned. Nonprofits must keep receipts that include the date, location, amount, and purpose of the expense. Records should also specify the individuals involved and the business purpose of the meal. Without sufficient documentation, the IRS may disallow the deduction.

An expense reporting system requiring written explanations for meal costs helps maintain compliance. Standardized forms can document how expenditures align with the nonprofit’s exempt purpose. For example, if a meal was purchased during a strategy meeting for a fundraising campaign, the report should explain how the discussion contributed to the organization’s objectives.

Electronic recordkeeping simplifies compliance. Many accounting software programs allow nonprofits to upload digital receipts and categorize expenses. This approach improves financial transparency and reporting accuracy in accordance with nonprofit accounting standards, such as those outlined by the Financial Accounting Standards Board (FASB).

Reimbursements for Volunteer Meals

Nonprofits often provide meals for volunteers to support their work. When volunteers pay for their own meals while performing services, they may be reimbursed if handled correctly. Reimbursements must follow an accountable plan, meaning they must have a documented business connection, be properly substantiated with receipts, and any excess funds must be returned. Otherwise, the reimbursement could be considered taxable income.

Clear reimbursement policies help avoid taxability issues. Nonprofits should outline eligible meal expenses, submission deadlines, and required documentation. For example, if a volunteer attends an all-day community outreach event and buys lunch, they should submit an expense report with an itemized receipt. Setting a reasonable per-meal reimbursement limit based on IRS per diem rates prevents excessive claims while ensuring fair compensation for out-of-pocket costs. If a nonprofit provides a flat meal stipend without requiring receipts, the amount may be taxable and reportable on a Form 1099 if it exceeds $600 in a year.

Allocating Expenses Across Programs

Properly distributing meal expenses ensures accurate financial reporting and compliance with nonprofit accounting standards. Expenses must be categorized into program services, management and general, and fundraising under Generally Accepted Accounting Principles (GAAP) and IRS Form 990 requirements. Misallocation can misrepresent financial statements and affect donor trust.

When meals serve multiple functions, such as staff training benefiting several programs, costs should be allocated using a reasonable methodology. One approach is prorating costs based on the number of attendees affiliated with each program. For instance, if a leadership retreat includes 60% direct service staff and 40% administrative personnel, meal costs should be allocated proportionally.

Accurate allocation also affects indirect cost rates, which impact grant reporting and reimbursement calculations. Many government and private grants require nonprofits to justify indirect costs, including meals, to ensure funds are used appropriately. A consistent allocation method helps maintain compliance and financial integrity.