The tax rules governing business meal expenses are commonly considered an intrusion into the peaceful bookkeeping function of a small business.
Indeed, the complex income tax policies regarding business meals and entertainment are confusing and frustrating to small-business owners, who, of course, would love to claim a full tax deduction for any food or drinks consumed while working.
Sadly, this is just not the case.
Meal expenses are only tax-deductible if you travel away from home overnight for business, or if the purpose of a local meal is business. If you travel for business, you should account for the meals in a separate bookkeeping entry, distinct from transportation and lodging.
It gets worse: much to the disappointment of many small-business operators (and coffee shop owners), buying coffee on the way to work is not a tax-deductible business expense.
The only way you can write off your cup of java as a business expense is if you drink it with a business associate – like a client or employee – while having a business discussion.
Write the associate’s name and a brief note on the receipt detailing the business discussed.
Business gifts have different tax rules altogether.
Purchasing a ball game ticket as a business gift is different from the cost of attending the game with the client or buying a meal afterward. Each should be accounted for separately – one as a business gift, the others as meal and entertainment expenses.
But, hey, enjoy the game and the festivities after. You actually can expense them.