Meals and Entertainment Deductions

As of January 1, 2018, what you know about deducting meals and entertainment had to be revised.

Up to tax year 2018, you were able to deduct 50% of your business meals and entertainment as a freelancer whether it’s as part of your travel expenses or as a business expense when you take someone out for business purposes to discuss business. Many people included both meals and entertainment in the same category and correctly deducted 50% of that total on their Schedule C’s.

This practice has to be changed. Reason: as of tax year 2018, no entertainment expenses will be allowed on your federal return. This includes tickets to sporting events.

What remains is the 50% deduction for your business meals as a freelancer be this for travel or for business meals. This 50% amount was increased to 100% for 2021 and 2022 for the meals provided by restaurants.

Thus In your bookkeeping, you should separate out business meals and entertainment into two categories. The business meals will be deductible. The entertainment will not be as entertainment.

It may be that some of the entertainment for you may be necessary for you to maintain your knowledge of your field. For instance, if you are a playwright, I believe that going to the theater is necessary for you to keep up in your field. Say you paid for two tickets to a play. I believe you still should be able to deduct the cost of one of these tickets as research or as cultural events. I do not believe that the cost of the second ticket would be deductible.

What about water, coffee or snacks that you have on hand in your studio as a photographer for clients and associates to drink and eat. Before tax year 2018, you could deduct these as 100% deductible. As of tax year 2018, these expenses will only be deductible at 50%.

If you order lunch in your office for you and an editor when you’re working with that editor, that deduction as before is deductible at 50%. For 2022 if provided by a restaurant, this would be 100% deductible.

On the other hand, if you give the public food at, for example, a conference, that food remains 100% deductible as does food provided at a holiday party or picnic.

It may be good to review what kinds of business meals you can actually deduct.

1 A meal is a business meal when you take someone out to eat to discuss business and you pay for both of you.

2 A meal is a business meal when you are away from home overnight or more on a business trip. You can use actual expenses or a domestic or foreign per diem as per the IRS.

3 A meal is not a business meal when you go out with one person or a group of people from work and you pick up the tab for your own meal nor is it a business meal when you take
turns picking up the tab for each other.

4 A meal is not a deductible business meal when you go to a conference or meeting in town and pay for your meal.

5 A meal is not a deductible business meal when you pay for your own lunch while you work.

If you are both a W-2 worker as well as a freelancer, as of the 2018 tax year no deduction for employee expenses will be allowed on your federal tax return though it could be on your state return. Please see  “What Should Freelancers Do With Both W-2 and 1099 Income and Expenses?”