Everybody's got to eat.

Hi June,

(Things are going well using your system, keeping everything organized for my indie tax preparer at year's end. Although I did break down and open a free business checking account because I didn't want to be paying vendors from the joint, home account. Still, I figure it's the tracking and not the checking account that is going to matter.)

Here's the question for the blog:
I'm confused on where to categorize costs for luncheons that I attend for service organizations (i.e., Kiwanis) and professional organizations. I know the memberships are deductible, but how to classify the weekly meeting costs?

Also, in general, can one categorize fees for attending any networking events - where meeting people for business leads is the objective - as an advertising expense?

Thanks - Ron in Long Beach, CA


Hi Ron,

Good. Happy to hear that you are following through with my recordkeeping system. I love success stories. And you are correct: It's the tracking not which checking account that matters.

When attending a business meeting where lunch is served you cannot deduct as a business expense the cost of your lunch. Were you to pay for the lunch of a a business colleague as well as for your own then you would be allowed to deduct the cost -- but only 50%.

The reasoning from the IRS: You'd be eating lunch anyway so the cost of your lunch is not really a cost of business.

Fees for any networking event can be categorized as advertising; or as dues if you pay a yearly fee. Remember to include transportation costs to and from the event.

I see from your site that your business works with local and community policy. You might want to take a look at the piece I wrote for New Mexico Business Weekly on deducting lobbying expenses.

Best,
June

Food Write-offs

June --

I have been a freelance graphic designer for more than 2 years. I live in Boulder, Colorado.

I belong to several networking groups. I joined the groups to meet others in my field, help find potential clients, and to learn about running my business from other business people. Some groups have members in businesses related to mine (ie people who might refer clients to me or that I might subcontract work to). Some groups have members in a variety of businesses (ie potential clients).

Most of the groups do not require dues, but we meet at restaurants and each person pays for their own meal and drinks.

At the meetings, we may or may not discuss business beyond exchanging business cards and talking a bit about what each person does.

Is the cost of my meal deductible?

What about potluck networking events? Some of the groups meet at members' homes, and everyone is expected to bring a dish to share. Can I deduct the cost of the dish?

Does it make a difference if the majority of the time is spent on business related topics? I learn a lot and meet great people at these events, but I would be eating more cheaply if I stayed at home!

Betty


Dear Betty,

Good food questions.

First know that business meals and/or entertainment [M&E] are deductible if you discuss business before, during or after the meal or event. The amount of time spent on business does not matter as long as the purpose of the meal or event was business not personal.

However, you may deduct the cost of the meal or event only if you pay the cost for your business associate as well as for yourself. So it you attend a networking luncheon and pay for your lunch only, no M&E deduction. You may deduct the cost of getting to and from the luncheon if you came and went between another business activity.

A potluck? Well, if you are like most people who bring something to a potluck you bring more than enough for one person. So in that case I would deduct the cost of the potluck meal.

Here are more posts on expenses -- meals and entertainment .

-- June

Meals & Entertainment Deduction @ 100%

June – Not quite sure how to both post a comment and ask a question in the same fell swoop on your blog page, so I’ll try here in e-mail instead. [Ron, click "comments" at the end of the post.]

I found you because I was looking for information on business checking online today. The fees, beginning at $12 monthly (for the least expensive option) seem unnecessary, and as I have been keeping solid records since beginning my consultancy last year, think I’m going to stick with the personal account for now. Nice to see someone provide a good rationale for what seems a rational choice. [Ron refers to this post: You Do Not Need A Business Checking Account .]

But now I have a question. You wrote as an example to deducting a business expense: "A carpenter deducts not only the tools that she buys, but also the expense of dining out. Why? Because during the meal with her husband she talks about her new business, gets his advice on questions of scheduling, picks his brain about various proposals, and tests his reaction to her brochure. She could not have had this business discussion at the family dinner table with her three children in attendance and so the gift given to her brother as thanks for baby-sitting while she was at this dinner is also a business expense."

Is this deductible at 50% for meals and entertainment, or is there another, full deduction category to be considering?

Thank you – Ron
Long Beach, Calif


Ron --

It's great to learn that my business-checking-post will save you $144 a year.

The carpenter's business meal is a 50% deduction as are just about all meals and entertainment.

The only M&E deductible at 100% are those that are offered to the general public. For instance: If you have an open house to display your artwork and you provide wine and snacks to visitors, that food and beverage is a 100% deduction.

Meals & Entertainment expenses are further explained in my book Self-employed Tax Solutions.

-- June

Checking; contributions; dining; home storage

Because Ron sent several questions look for my answers after each question.


Hi June,

I initially found you because I was looking for information on business checking online. The fees, beginning at $12 monthly (for the least expensive option) seem unnecessary, and as I have been keeping solid records since beginning my consultancy last year, think I’m going to stick with the personal account for now. Nice to see someone provide a good rationale for what seems a rational choice.
Ron refers to these posts on business checking accounts.

So now I’m writing because I’ve just finished reading your book Self-employed Tax Solutions (terrific – thank you! everyone should follow your New Year’s Eve/Day tip!). I agree. I’ve been tracking all my expenses and incomes meticulously, but you gave me some other good points to think about. Here are some questions I have, based on the book scenarios:

1) My kids’ sports leagues all solicit team sponsorships from local businesses. But in your book, you suggest this might not be a wise write-off for indies. Can you elaborate? Should I not do it? And what about sponsoring the softball team that I play on myself?
A quick overview on charitable contributions made by sole proprietorships -- indies: They are not deductible as business deductions. They are personal deductions. Advertising is deductible. So $100 to your daughter's soccer team -- not deductible. $100 for an advertisement in your son's concert program -- deductible. $500 for hockey uniforms that have the name of your business visible to the public -- deductible.

2) I’m still hung up on the “if you have dinner with your wife …” point, primarily because you’re describing exactly what happens to us: The only real time we get to talk about the business, strategy and planning is when we dine together! Permissible deduction, right?
Dinner with someone with whom you have a personal relationship is deductible only if the reason for the dinner is business. Not that you happen to talk business while at dinner. There must be specific business goals that you work on achieving at dinner: spouse reviews brochure; spouse sketches designs for an ad. Things like that.

3) Currently, I can’t take the home office deduction because we don’t have “exclusive space” to work from. But, we do have some space that is exclusively used for storage of business books, files and materials. Can I claim that area? Yes.

Thank you – RA in L.A.
Ron
Long Beach, Calif.

Reimbursed Meal & Entertainment Expenses

June --

I am not a tax professional but I believe there is an issue that would cost a taxpayer money on the federal return if the 1099 he/she receives includes expenses... You cannot deduct dollar-for-dollar some meal and T&E expenses on your federal return...therefore if those expenses are reimbursed at 100% and included on the 1099 you can only deduct the allowable percentage on your return...so it behooves the corporation providing the 1099 to include the expenses on it but it is to your disadvantage...correct?

Herb


Incorrect, Herb. First, so that we are all on the same page: It's not "meal and T&E." I assume you mean by "T" travel expenses. It's M&E for meals and entertainment. M&E expenses are deductible at 50% by the indie or corporation that incurred the expense. [There are exceptions which I will not go into here. You may read a lot more M&E here expenses -- meals and entertainment.]

That means that if Victor Visual takes a client out for a business dinner and he spends $200, he may deduct only $100 on as a business M&E deduction. The same would apply were Callous Corporation to take out a client for dinner.

Callous Corp engages Victor for a design project and will pay Victor $3,000. In doing that project Victor must wine and dine some folks at a cost -- to the corporation -- of $500. Victor bills the corporation $3500. $3000 for his fee as well as $500 to reimburse him for expenses. Same way he would get reimbursed were he to have had $500 in printing costs for Callous.

Callous pays Victor the $3500 and is allowed to deduct the entire fee of $3000. However, Callous may deduct only $250 for the M&E. It was Callous's expense not Victor's.

Of course, if Victor's arrangement with Callous said that his fee covered all expenses, he would not be reimbursed and he would deduct only 50% of his M&E expenses.

Many payers, Like Callous Corp, include M&E expenses on the 1099 in order to cheat the IRS. That is Callous's and the IRS's problem, not yours. As long as you have proof of your arrangement with Callous and receipts to prove the reimbursement arrangement you take 100% of the deduction.

Here are more posts on expenses -- reimbursed .

You said you are not an accountant, but I am going to give you some accounting jargon here anyway. Just in case you want to pass it on to Sammy Segar CPA who doesn't agree.

I've often explained in my seminars and writing that I take the tax code and put it into language that my talented indie readers will understand. Here's a short example, already simplified from the tax code verbiage but I think you'll get the idea. By the way, the interpretation from employee to indie that applies to indies is in red:

Where meal and/or entertainment expenses incurred in connection with the performance of services are reimbursed, the directly-related-to and associated-with tests for the deductibility of the expenses are applied to the taxpayer who actually claims the expenditure as a deduction. Similar rules apply for the Code Sec. 274(n) percentage limitation on the deduction (the 50% limit) [S Rept No. 99-313 (PL 99-514) p. 71]. Specifically, the 50% limit doesn't apply to expenses described by Code Sec. 274(e)(3) which are expenses incurred in connection with performing services under a reimbursement or other expense allowance arrangement for an employer, if the expense isn't treated as compensation, or for a person other than an employer, if the taxpayer adequately accounts to that person for those expenses [Code Sec. 274(n)(2)(A)]

Similarly, a nonemployee service provider (e.g., an independent contractor) that provides the required substantiation to and is reimbursed by the service-recipient for meal and entertainment expenses incurred on the latter's behalf isn't subject to the percentage reduction rule. The rule applies to the service-recipient, who can deduct only 50% of the reimbursement. Notice 87-23].

Once again thanks to NATP for research help.

-- June

Are gift baskets tax deductible?

June --

I've been a sole proprietor for 25 years. I am being audited for the second time (in 25 years). I searched Ask.com for "Are gift baskets tax deductible?". As I prepare for this audit I am starting to doubt basic write-offs I have taken primarily because of all the research I am doing.

I got to wondering if a gift basket comprised of food would somehow fall under meals and entertainment.

Thanks for the information.
Janice
Orange , Ca


Dear Janice,

Regardless of the cost of the gift basket your deduction is limited to $25 . And that is the total you may deduct as a gift for a business associate for the entire year.

Were you to purchase the gift basket and take it with you as your meal while on a picnic with your associate and you discuss business before, during or after the picnic meal then you could deduct the basket as a meals & entertainment expense.

Here's an example of the difference in deductions:

You purchase two $150 gift baskets for a client during the year.
Your cost: $300.
Your deduction: $25

You have two $150 business dinners with your client during the year.
Your cost: $300.
Your deduction: $150. [50% of $300]

-- June

Meal Expenses For House Sitters

Hi June,

My name is Megan and I'm from Portland, OR. I've recently ordered your book and am looking forward to receiving it.

I've worked on the side as an indie house and petsitter off and on since 2001. I mostly move into people's houses for several nights or weeks and take care of their houses and furry kids while they are away. In recent years I've done this once every month or more, depending on the season.

I may be grasping at straws here but want to cover all of my bases...I'm wondering if my meals while I'm on the job are deductible as a business expense? I go grocery shopping and cook in the home that I'm staying in. If they are deductible and I don't have my receipts from last year, would it be appropriate to use the Standard Meal Allowance?

Thanks,
Megan


Dear Megan,

Meals are deductible as a business expense in only two situations.

1. You may deduct the cost of the meal if you take a business associate to a restaurant, you pay for yourself and the associate and there is a business reason for the meal.

2. You may deduct all costs of your own meals and snacks while traveling. You may use actual cost or the IRS per diem amount. Travel may be simply defined as staying overnight away from your tax home for a business reason . Tax home is the area where you live and generally work.


Were you my client I would not take a deduction for meals even though you stay overnight if you are pet or house sitting in the neighborhood, your town, close by. If you were a substantial distance from your tax home, then I would take meals deductions.

Other tax pros may take a more aggressive approach and deduct all meals while overnight.

Best,
June

Meals Included

Hello June!

I am a sole proprietor.

Currently, I travel to a different city during the week and get back home on the weekends. I was going to use per diem rate for my meals and incidentals while traveling but have a question. Most of the hotels include complimentary breakfast. And when you book, you cannot decline it and get a different room rate.

My question is whether this can prevent me from using per diem meal deduction and if yes, then how do I split room rate into lodging and meal parts (the hotel has no price for the meal part, as it is complimentary)?

Thank you.
DD


Hello DD,

You may still use the per diem amount but were I your tax pro I would deduct the value of the breakfast from the hotel cost. Coffee & a donut being of less value than a full breakfast, of course.

For those of you unfamiliar with per diem for indies, here's how it works:

Instead of using as a business deduction your actual meal costs while travelling, you may use the federal per day amount. There are different rates depending on city and date.

If you tend to eat on the cheap when traveling for business you often get a bigger deduction by using the federal rate.

Here are more of my posts on travel per diem and how to use the charts.

Here is the link for the rates in the USA.

Here's the link for foreign travel rates.

-- June

Meals Deductions: A Quick Overview.

June --

After 20+ years as an executive and employed consultant, I had an opportunity to go on my own last year as an independent. It was a successful year. I provide program management services in the technology implementation space.

I was on a temporary project assignment that has now concluded. I read the tips on your site on deductibility of meals using the IRS per diem meal allowance. As an independent and self-employed, if I use the per diem amount in lieu of actuals, is the per diem amount subject to the 50% limit. Example: per diem rate for 2008 Washington DC is $64. Do I use $64 or $32?

Please advise.

Thank you.
Jason
Bethel Park, PA


Jason --

Here's a quick overview.

Food and beverages offered to the general public are 100% deductible. That means if an artist has a gallery opening and invites the public or if an IT indie invites the community to his new office, then the food and drink is served at these events is a 100% deductible meals expense.

All other meals, whether calculated as actual amount paid or taken from the per diem table, are deducted at 50%.

If not traveling you may deduct meals only when you paid for yourself plus someone with whom you have a business connection and dined for a business reason.

When traveling you may deduct all meals and snacks for yourself; no business associate need be with you. Although all travel meals are deductible they, too, may be deducted at only 50%.

Hope that clears it up for you.

-- June

You must get receipts for meals.

June --

When traveling for work meals are deductible at 50% for the location and time period in question without showing receipts.

If I do photography for an organization at a place where meals and lodging are included, can one still take the meal deduction? Or does the rule, "You can't deduct what you did not pay for" hold?

And what if the meals and lodging -- and perhaps travel -- are in lieu of monetary payment?

Thank you.

Miriam
New York


Hello Miriam,

All deductible business meals -- whether while traveling or not -- are deductible at 50%. However, I think you picked up some misleading info somewhere. You must have a receipt for all business meals and entertainment.

You do not need receipts for meals while traveling if you choose to use the per diem method of deduction.

If meals are included you may not deduct the cost of meals.

If you receive meals and lodging or travel in lieu of payment, then the value of the meals, lodging and travel is income to you. You may then deduct your expenses from that income.

Best,
June

Reimbursed Expenses Included on a 1099

Hi June,

I just discovered your site today.. am I glad!!

I have been an independent consultant since Oct 2006.

I received a 1099 which includes all my reimbursed expenses. My question has to do with the meals deductions: in using Turbo tax, it appears that only 50% of my meals are deductible. That would mean that 50% of meals becomes ordinary taxable income.

Am I wrong?

Claudia
San Mateo, CA


Dear Claudia,

It is not you who are wrong. Turbo Tax is wrong.

When an indie is reimbursed for expenses and those reimbursements are included on a 1099, the indie may deduct all the reimbursed expenses.

Reimbursed meal & entertainment expenses are not subject to the 50% reduction. I put them on the "Other Expenses" line on the Schedule C and label them "Expenses included in 1099 income above."

The person or company who reimbursed you is subject to the 50% reduction. They often try to get around that by including the reimbursement on a 1099 to an unsuspecting or unknowing indie.

The regulation sounds this way in tax jargon: A nonemployee service provider (e.g., an independent contractor) that provides the required substantiation to and is reimbursed by the service-recipient for meal and entertainment expenses incurred on the latter's behalf isn't subject to the percentage reduction rule. The rule applies to the service-recipient, who can deduct only 50% of the reimbursement.

For those of you wanting to argue this with your tax pro: This is IRS Code Section 274(n)(2)(A) and Notice 87-23.

You see. I told you all I read a lot of those thousands of pages of tax code!!

Cheers,
June

Meals & Entertainment Expense

... Louisville Ky ... serial entrepreneur ... 1 year ...

I have a question regarding your invite the public, get a bigger deduction on your website: If I am hosting an event ( 3 on 3 basketball tournament) can I deduct the cost of food and liquor for the event?

Thanks,
Matt


Hi Matt,

If the tournament is for invited guests only you may deduct 50% of the cost of the food and drinks.

If the event is open to the public then you may deduct 100% of the cost.

There is more info on this topic in my book Self-employed Tax Solutions .

-- June

Hubby in the Office: Not Good

Hi June,

I have been self-employed as a writer and editor since 1991. About half of my income is from travel writing...I'm coauthor of guidebooks to Oregon, Montana, and Utah. In the past, I've always deducted my meals and entertainment when I'm traveling to research these books (which require regular updating) at the 50% level.

But since reading your book, it occurs to me that I could classify them as research and thus claim 100%. What do you think?

Also, about that home office...mine is a small portion of a room that I use all day long for work. Sometimes, after dinner my husband will space out in front of You Tube or check sports scores on the computer in my office space. Does this disqualify me for the home office deduction?

Thanks so much,
Judy
Portland, OR


Hello Judy,

Meals and entertainment while traveling for business are considered meals & entertainment expense and so are deductible at 50%.

If you take a client to a jazz club and discuss business before, during or after the show that's an entertainment expense. What I think you may be confused on is this: If a jazz musician goes to a jazz club to hear a certain saxophonist, that's research or education for the jazz musician, not an entertainment expense. In the same way that your going to a writers' workshop would be a research or study expense.

If your husband spaces out in the portion of the room that you use an an office, then absolutely no home office deduction allowed.

-- June

On-the-road Meal Deductions

June --

I've been a newspaper courier for 5 years.

I deliver several different weekly newspapers all in different cities. I use my home as an office. I travel over 500 miles a week and my routes are quite large. I'm on the road for 10 - 12 hours a day 3 days a week. I get very tired from driving that long + lifting bundles. I sometime stop to eat and rest. Would my meals be deductible?

Thank You, Kevin from Kent, Ohio


Hello Kevin,

You don't say whether you stay overnight nor how long you rest. Based on what you've said, your meals are not deductible.

Meals while on the road are deductible if your trip is considered "travel." Travel means you must stay overnight or you must rest to properly perform your duties.

If your trip is considered travel you may deduct all travel expenses and the cost of meals and lodging.

In my book, Self-employed Tax Solutions, all travel and also travel-meal expense is explained in depth. It is an expense topic that has a lot of rules as well as nuances. Here's a Travis Truck Driver example directly from my book:

Travis Truck Driver leaves the terminal at five in the morning. Three hundred miles later he’s at the turnaround. While his truck is being unloaded he has a big lunch and then dozes off outside the diner while waiting for the guys to finish the reloading. He then heads back to the terminal where the truck is again unloaded. He’s home by midnight. Travis’ lunch break nap was just that, “a nap.” It was not enough time to get adequate sleep. His trip is not considered travel. Therefore he cannot deduct travel expenses.

Best,
June

Deduct the cost of a husband-wife business meal?

June --

I am a consultant on higher education . When husband and wife are professionals with separate self-employed businesses, can they deduct costs of meals where they go out to dinner to get away from household distractions and discuss each other's work. For example, where one spouse acts as an editor/critic of the other's research paper to be submitted for for-profit publication?

Any IRS cases that you can cite on this?

Velma from California

Dear Velma,

Neither I nor my tax service could find any IRS case or regulation prohibiting the deduction of the meal if the circumstances meet all the meals & entertainment requirements.

In my book, Self-employed Tax Solutions, I explain it this way:

A carpenter deducts not only the tools that she buys, but also the expense of dining out. Why? Because during the meal with her husband, an ad agency guy, she explains the timetable for her new business, gets his input on questions of scheduling, picks his brain about various proposals, and tests his reaction to her brochure. She could not have had this business discussion at the family dinner table with her three children in attendance and so the gift given to her brother as thanks for baby-sitting while she was at this dinner is also a business expense.

-- June

Per Diem Often Advantageous for Business Travel

Hi June,

I have been a marketing consultant for three years. I have an obscure question on business expenses.

When I travel to Washington DC to visit a client and prospects I stay with my sister because it is nicer and less expensive than staying in a hotel. As a thank you, I take her and my brother-in-law out to dinner one night. Total bill has ranged from $100-$150. (I typically stay two or three nights). Should I classify this as deductible meals and entertainment which is limited to 50% of the expense or as a gift which is limited to only $25? Or something else or nothing?

Best regards,
Suzanne ... from Dutchess County, NY


Dear Suzanne,

It is clearly a thank-you gift and so is limited to a $25 deduction. For it to be a business meals & entertainment expense you must discuss business before, during or after the meal or the entertainment.

However, are you aware that when traveling you may deduct a per diem amount for meals and incidentals rather than use actual expenses? I explain it this way in my book, Self-employed Tax Solutions:

Alternative Travel Records
For most of your travel expenses you will have receipts of some sort – cancelled checks, credit cards slips, or cash receipts. Well, after its own fashion the IRS has tried to make recordkeeping for travel easier. Yet, as is ever the case with IRS regulations, it is not self-employeds for whom easier recordkeeping was set up but for employers and employees; the self-employed just happen to benefit from the crumbs that fall from the table.

The IRS has issued per diem (per day) charts. These charts list the maximum amounts allowed to be deducted without receipts for “LODGING” and for “MEALS + INCIDENTALS.” Self-employeds may use the amounts listed for MEALS + INCIDENTALS only.

So, if you do not have receipts for all of your travel meals, then be sure to ask your tax pro about using the alternative per diem method. In your case, a two day/two night stay in Washington DC would get you a $71 X 2 = $142 M&E deduction [2009 rate] as well as your gift to your sister.

Here is the link for the IRS domestic per diem chart .

Best regards,
June

Receipts for Travel Expenses

June --

I have been an indie for 6 months - as a researcher, speaker, and writer about world affairs - in Reston, VA.

When I travel for business, do I need receipts for every bite of food or hotel room I deduct or can I take a standard deduction? If standard, where do I find the rates?

Thank you.
William


Hello William,

On a tax return travel expenses fall in to two categories: Meals and Everything Else.For Meals & Incidentals you do not need receipts. You may instead use the IRS "per diem" amount for the city you were in and the date you were there. The rates are in IRS Publication 1542.For Everything Else you must have receipts. Be sure to read Business Travel Expenses on my website.

Best,
June

Can I deduct meals & lodging?

June --

I've worked as a software consultant on 1099 on and off for 15 years.

I work at my clients business site 3-4 days of every week and the rest of the week I work at home. My home is 60 miles from my clients business. Since it's such a long commute I always stay in a hotel close to the clients site the 2-3 nites I'm working at the clients place. I do this every week. Can I deduct travelling expenses for the hotel/food etc? I do not claim a home office deduction.

Thanx a lot in advance.
Brian :)



Hello Brian,

You say "clients site" not client's site nor clients' site so I don't know if you are talking about one or more clients. If you have only client brings that brings up the question : Are you really self-employed?

Knowing nothing else about your work or number of clients, I'll assume for this situation that you are legitimately self-employed.

You have no home office so you may not take the commute to your client's site.

Sixty miles is not a long drive. If for your convenience you are staying there rather than driving back home then you may not deduct costs for lodging and meals.

If your work requires you to be available on your client's site for so many hours that you would be too tired to safely drive back home then lodging and meals would be a legitimate deduction.

Best,
June

Trucker Expenses

June --

What are the usual and customary expenses of a long haul truck driver?

Frank


Hello Frank,

A trucker, much the same as any other indie, may deduct expenses related to his business.

For starters, I emailed to you the list of expenses typical to all self-employeds. I also suggest that you read Is it a deductible business expense? on my website .

In my book, Self-employed Tax Solutions, all travel and also travel-meal expense is explained in depth. To sum up: Generally, you may deduct all travel expenses and the cost of meals and lodging if your business trip is overnight or long enough that you need to stop for sleep or rest to properly perform your duties. In most cases, you can deduct only 50% of your meal expenses. Here's a Travis Truck Driver example directly from my book:

Travis Truck Driver leaves the terminal at five in the morning. Three hundred miles later he’s at the turnaround. While his truck is being unloaded he has a big lunch and then dozes off outside the diner while waiting for the guys to finish the reloading. He then heads back to the terminal where the truck is again unloaded. He’s home by midnight. Travis’ lunch break nap was just that, “a nap.” It was not enough time to get adequate sleep. His trip is not considered TRAVEL. Therefore he cannot deduct TRAVEL expenses.

As a long haul trucker, however, I assume Travis' situation does not apply to you. There is a special per-day meal allowance for transportation workers. You're a transportation worker if your work involves moving people or goods by airplane, barge, bus, ship, train, or truck, and if you are regularly required to travel away from home through various parts of the country.

If this applies to you, you can claim a standard meal allowance of $52 a day. Were you not considered a transportation worker you would need to determine the standard meal allowance for every area where you stop for sleep or rest.

As I said, generally, you may deduct only 50% of your meal expenses. However, if you are subject to the Department of Transportation (DOT) hours of service limits, that percentage is increased to 75% for business meals consumed during, or incident to, any period of duty for which those limits are in effect.

Hope that puts you on the right road.

Best,
June

The Starbucks' Deduction

June --

Here's a question that could only be asked in this new coffee culture.

I am self-employed and about 50% of the work I do requires me to have internet access, which I don't have at home. I am always at the same local coffee shop using their internet for a couple hours a day. I always buy a cup of coffee because I'm using their internet, electricity, and space for a minimum of 2hrs/day. I never do work at home. Can my coffee be considered a business expense as it may be necessary in order for me to have internet access? There is no sign posted at this independently owned coffee shop stating that you must buy something to use the internet. But, you can't get access to the wifi unless you have the special code, which you receive at the register.

Angela from Seattle, WA


Hello Angela,

Wish I could tell you the coffee were an expense, but as it's currently set up at your local coffee place it is not. That's because you may not take as a deduction the cost of meals or snacks for yourself. Why not ask for the cost of access to the code without buying coffee and see if they give it to you. If you must buy something in order to get access then you have a legitimate reason to deduct the cost of the least expensive item.

Other ways to look at it:

If coffee were $3.00 a cup but to get the code a cup cost $4.00 then you'd have a $1.00 deduction.

Or if coffee shops all over town charged $2.00 a cup and your place, the only one with Internet service, charged $3.00, well, then we could argue for a dollar deduction.

Of course, if you were there with a business associate and you paid for her coffee and yours, then both coffees are a deductible meals&entertainment expense for you.

-- June