When you are traveling for business, at some point you will likely have to eat at a restaurant. Deducting the cost of your meals from taxes will make the food taste that much better. You may be able to deduct business meals, but there is a specific set of guidelines you have to follow.
According to the IRS you will have to eat no matter where you are, and because you can’t deduct home meals you also can’t deduct all business trip meals. IRS guidelines allows you to deduct 50% of food costs while traveling. There are two different ways to deduct your meal expenses. You can either itemize your actual expense or take a predetermined amount set by the IRS.
Actual Cost Deductions
When you choose to deduct the cost of the meal you have to keep records of everything spent, this includes taxes and tips. This can also include meals that you have brought or taken from your destination, as well as meals purchased at your business location. While filing your taxes you add up all food expenses and divide it in half to find out what is deductible from your expenses.
If you take a business trip and combine it with personal vacation you can only claim the meals you eat while doing business related functions, such as attending conferences or meetings.
While you don’t have to keep all of your receipts you will have to prove that the meal was consumed during normal business functions, so you should track all expenses.
The Standard Method
If you decide not to keep track of your expenses, you can use the standard deduction. This deduction is set by the IRS and allows you a set amount that you can deduct daily for meals for each day of your business trip. This is known as the standard meal allowance, it includes all expenses, including your meal, taxes and tips.
Depending on your destination the standard allowance will change. This allowance is dependent on what federal works charge and while modest is revised each year.
If you decide to use the standard allowance for meals then you have to use it for all of your business trips. The IRS does not allow you to switch between methods of deduction. So you have to choose to itemize or the standard deduction regardless of where you are traveling to.
Since the standard allowance generally ends up in lower deductions it should be used when traveling to lower cost areas or if you are unable to keep track of your actual expenses.