{"id":16,"date":"2014-08-01T22:01:33","date_gmt":"2014-08-01T22:01:33","guid":{"rendered":"http:\/\/www.hsco-cpa.com.php73-40.lan3-1.websitetestlink.com\/blog\/\/?p=16"},"modified":"2014-08-01T22:03:12","modified_gmt":"2014-08-01T22:03:12","slug":"deductions-for-dining-out","status":"publish","type":"post","link":"https:\/\/www.hsco-cpa.com\/blog\/deductions-for-dining-out\/","title":{"rendered":"Deductions for Dining Out"},"content":{"rendered":"

Deductions for Dining Out<\/strong><\/p>\n

\"DineOutDeductions\"<\/a>Champagne and caviar on the\u00a0IRS? Typically, the answer is no.\u00a0Nevertheless, there are times when\u00a0you can go out to eat\u2014perhaps to\u00a0the best restaurant in town\u2014and\u00a0recoup some of your costs through\u00a0tax savings.<\/p>\n

Business as usual\u00a0<\/strong>
\nPerhaps the most obvious way to\u00a0deduct dining costs is to buy a meal\u00a0for someone with whom you do\u00a0business or would like to do business.\u00a0The good news is that everything\u00a0counts: food, drinks, tax, and tip. The\u00a0bad news? Meal costs typically are\u00a0considered \u00a0entertainment expenses,\u00a0which generally have a 50% cap on\u00a0deductions.<\/p>\n

Example 1:<\/strong> Nora Peters has\u00a0dinner with a potential client for her\u00a0landscaping business. They both have\u00a0full-course meals\u00a0with wine, and the\u00a0tab comes to $100\u00a0with tax and tip. If\u00a0Nora pays the bill,\u00a0she can take a $50\u00a0tax deduction.<\/p>\n

The IRS\u00a0explicitly frowns\u00a0on so-called \u201ctaking\u00a0turns\u201d deductions.\u00a0Thus, if the\u00a0potential client is\u00a0Nora\u2019s neighbor and\u00a0they dine together\u00a0every month, alternating as to who\u00a0pays the bill, the IRS won\u2019t allow\u00a0either party to take tax deductions.\u00a0However, that may not always be\u00a0the case.<\/p>\n

Example 2:<\/strong> Nora and her\u00a0neighbor dine together throughout\u00a0the year, discussing possible ideas\u00a0for the latter\u2019s garden, and Nora\u00a0picks up the tab every other time,\u00a0paying a total of $600. Eventually, the\u00a0neighbor hires Nora to landscape her\u00a0garden; Nora ultimately earns $2,000\u00a0from that job, reported as taxable\u00a0income. Can Nora take a $300 (50%of $600) tax deduction, despite the\u00a0alternate bill paying? Our office can\u00a0help you determine the answer to\u00a0such difficult questions.<\/p>\n

Beyond reasonable doubt
\n<\/strong>The IRS also asserts that meal\u00a0outlays that are \u201clavish or extravagant\u201d\u00a0won\u2019t qualify for a tax deduction.\u00a0Unfortunately, the agency doesn\u2019t\u00a0provide a dollar limit or any tangible\u00a0guideline, only that the cost must be\u00a0\u201creasonable,\u201d considering the \u201cfacts\u00a0and circumstances.\u201d Merely dining at\u00a0a deluxe restaurant or a pricey resort\u00a0won\u2019t automatically rule out a 50%\u00a0deduction.<\/p>\n

One way to approach this issue\u00a0is to put things into perspective.\u00a0In a major city with a steep cost of\u00a0living, spending $100 on a dinner for\u00a0two may not be considered lavish, if\u00a0there\u2019s a valid business purpose for\u00a0the excursion. Conversely, spending\u00a0hundreds of dollars on a meal with\u00a0someone who has only a peripheral\u00a0connection to your company and\u00a0little chance of providing meaningful\u00a0revenues in the future, might not pass\u00a0muster.<\/p>\n

One U.S. Commerce Department website provides an example of\u00a0spending $200 for a business-related\u00a0meal. If $110 of that amount is not\u00a0allowable because it is lavish and extravagant, the remaining $90 is\u00a0subject to the 50% limit. Thus, the tax deduction could be $45 (50% of $90).<\/p>\n

Going solo
\n<\/strong>You should be aware that the 50%\u00a0limit also applies to business meals\u00a0away from home, not just to meals\u00a0where you\u2019re entertaining someone.<\/p>\n

Example 3:<\/strong> Ron Sawyer travels\u00a0from his Dallas home to Tucson on\u00a0a sales trip. He does no entertaining\u00a0but spends $140 eating his meals in\u00a0restaurants. Ron\u2019s meal deduction is\u00a0$70 (50% of $140).<\/p>\n

Filling out a foursome
\n<\/strong>Generally, you can\u2019t claim a 50%\u00a0deduction for buying your spouse a\u00a0meal. There are exceptions, though,\u00a0if including your spouse at the table\u00a0serves a business purpose, rather than one that\u2019s personal or social.
\nExample 4:<\/strong> Tim Walker invites\u00a0a customer to dinner. The customer\u00a0is visiting from out of town, so the\u00a0customer\u2019s spouse is also invited \u00a0because it is impractical to entertain\u00a0the customer without the spouse.\u00a0Tim can deduct 50% of the cost of\u00a0the meal for the customer\u2019s spouse.\u00a0What\u2019s more, if Tim\u2019s wife joins the\u00a0group because the customer\u2019s spouse\u00a0is present, the cost of the meal for\u00a0Tim\u2019s wife is also deductible.<\/p>\n

Taking the deduction
\n<\/strong>For self-employed individuals\u00a0and business owners, taking 50%\u00a0deductions for business meals may\u00a0be straightforward. For employees,\u00a0though, those deductions might be\u00a0harder to obtain. Unreimbursed\u00a0expenses are included in\u00a0miscellaneous itemized deductions,\u00a0which are deductible only to the\u00a0extent they exceed 2% of adjusted\u00a0gross income (AGI).<\/p>\n

Example 5:<\/strong> Lynn Knox, who\u00a0is an employee, spends $500 on\u00a0business meals in 2014 and is not\u00a0reimbursed. When she prepares\u00a0her tax return for the year, she\u00a0includes $250 as a miscellaneous\u00a0itemized deduction. Her AGI is\u00a0$100,000, so her 2% threshold is\u00a0$2,000. If Lynn\u2019s miscellaneous\u00a0deductions add up to $2,400, she is \u00a0entitled to deduct the $400 excess.\u00a0Without her business meals, Lynn\u2019s miscellaneous deductions would\u00a0have been only $2,150, generating a\u00a0$150 deduction, so Lynn effectively\u00a0gets a $250 deduction for her $500\u00a0of business meal expenses. If Lynn\u2019s\u00a0miscellaneous deductions were under\u00a0$2,000, she would have no tax benefit\u00a0from her business meals.<\/p>\n","protected":false},"excerpt":{"rendered":"

Deductions for Dining Out Champagne and caviar on the\u00a0IRS? Typically, the answer is no.\u00a0Nevertheless, there are times when\u00a0you can go out to eat\u2014perhaps to\u00a0the best restaurant in town\u2014and\u00a0recoup some of your costs through\u00a0tax savings. Business as usual\u00a0 Perhaps the most obvious way to\u00a0deduct dining costs is to buy a meal\u00a0for someone with whom you do\u00a0business… Continue reading Deductions for Dining Out<\/span><\/a><\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2],"tags":[],"_links":{"self":[{"href":"https:\/\/www.hsco-cpa.com\/blog\/wp-json\/wp\/v2\/posts\/16"}],"collection":[{"href":"https:\/\/www.hsco-cpa.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.hsco-cpa.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.hsco-cpa.com\/blog\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.hsco-cpa.com\/blog\/wp-json\/wp\/v2\/comments?post=16"}],"version-history":[{"count":3,"href":"https:\/\/www.hsco-cpa.com\/blog\/wp-json\/wp\/v2\/posts\/16\/revisions"}],"predecessor-version":[{"id":23,"href":"https:\/\/www.hsco-cpa.com\/blog\/wp-json\/wp\/v2\/posts\/16\/revisions\/23"}],"wp:attachment":[{"href":"https:\/\/www.hsco-cpa.com\/blog\/wp-json\/wp\/v2\/media?parent=16"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.hsco-cpa.com\/blog\/wp-json\/wp\/v2\/categories?post=16"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.hsco-cpa.com\/blog\/wp-json\/wp\/v2\/tags?post=16"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}