What Meeting Expenses Are Tax Deductible?

The costs associated with business meetings are common expenditures, but the Internal Revenue Service (IRS) has specific regulations that determine whether they can be deducted from your taxable income.

What Qualifies as a Business Meeting Expense

To be deductible, a business meeting expense must be both “ordinary and necessary.” An ordinary expense is one that is common and accepted in your trade or business. A necessary expense is one that is helpful and appropriate for your business. This definition covers a range of costs directly tied to conducting business gatherings.

Commonly deductible meeting expenses include the cost of renting a venue or conference room. If you need equipment for a presentation, such as projectors or audio/visual systems, the rental fees are also deductible. The cost of supplies used during the meeting, like whiteboards, markers, and handouts for attendees, falls under this category.

A change from the Tax Cuts and Jobs Act of 2017 (TCJA) involves entertainment expenses. As a rule, the cost of entertainment is no longer deductible. This means expenses for activities like taking a client to a sporting event or a concert cannot be written off, even if business is discussed.

This rule against deducting entertainment contrasts with business meals, which retain partial deductibility under specific conditions. If a meal is provided during a business meeting, it is not automatically classified as non-deductible entertainment but must meet a series of tests to qualify.

Special Rules for Meals and Travel Costs

The costs for meals and travel associated with business meetings are common deductions subject to specific limitations. The IRS allows you to deduct 50% of the total cost of business meals. This 50% limit applies to food and beverages, as well as any taxes and tips. Transportation to the meal is a separate travel expense not subject to this limit.

To qualify for the 50% deduction, a meal expense must satisfy several conditions.

• The expense cannot be lavish or extravagant under the circumstances.
• The taxpayer or an employee of the business must be present when the food and beverages are served.
• The meal must be provided to a current or potential customer, client, consultant, or a similar business contact.
• If a meal takes place during an entertainment event, its cost must be stated separately on the bill or invoice to be deductible.

Travel costs for out-of-town business meetings are deductible when you must travel away from your “tax home,” which is the city or general area of your main place of business. Travel is considered away from home if your duties require you to be away longer than a normal workday, necessitating sleep or rest. Deductible travel expenses include the cost of transportation, lodging, and other incidentals like dry cleaning.

When a trip combines business with personal activities, the deductibility of travel costs depends on the trip’s primary purpose. If the trip’s main purpose is business, you can deduct transportation costs to and from the destination. However, you can only deduct lodging and other expenses for the days you spend on business activities. If the trip is primarily for personal reasons, you cannot deduct transportation costs, but you can still deduct expenses directly related to business conducted during the trip.

Documentation and Recordkeeping Requirements

To claim deductions for meeting expenses, you must maintain records to substantiate your claims. The IRS can disallow deductions without proper documentation.

For any business expense, you must have records that prove the amount, date, and business purpose. Acceptable forms of proof include itemized receipts, canceled checks, and invoices. A credit card statement alone is not sufficient because it often lacks the required itemized information. Your records should clearly show what was purchased and how it related to the business event.

The requirements are more detailed for travel and meal expenses. In addition to the amount, date, and location, you must document the business purpose of the meal or trip and the business relationship of the individuals involved. For meals, note who attended and what business topics were discussed. For travel, a log of daily business activities can prove the trip’s purpose.

It is a best practice to keep these records organized and accessible for at least three years from the date you file your tax return, as this is the period during which the IRS can initiate an audit. Using accounting software or dedicated expense-tracking apps can help automate and organize this process.

How to Report Meeting Expenses

After determining your deductible expenses and gathering documentation, you must report them correctly on your tax return. The specific form you use depends on your business structure. You must report the final, calculated deduction amounts, such as the 50% limit for meals, not the total expense.

For sole proprietors and single-member LLCs, expenses are reported on Schedule C (Form 1040), “Profit or Loss from Business.” On this form, travel expenses are entered on line 24a. The deductible portion of business meals is reported separately on line 24b. Other meeting-related costs, like venue rentals or supplies, are included in the total for “Other expenses” in Part V of the form.

Corporations and partnerships report these expenses on their respective business tax returns. C corporations use Form 1120, “U.S. Corporation Income Tax Return,” while partnerships file Form 1065, “U.S. Return of Partnership Income.” The expense categories on these forms are similar to Schedule C, with specific lines for travel and meals.

If a business reimburses its employees for meeting expenses, the reporting can be handled through an accountable plan. Under such a plan, employees must substantiate their business expenses to the employer and return any excess reimbursement in a reasonable time. When these rules are followed, the reimbursement is not considered income to the employee, and the employer deducts the expenses on its own tax return.