As a business owner, the IRS allows you to deduct a percentage of restaurant expenses as a tax reduction. However, these deductions must meet certain requirements in order to be deductible. Restaurant expenses are the costs of meals you provide for a client or customer, including if they are a part of another form of entertainment, such as a football game. This can take place at your own business, a restaurant, a convention, or for yourself if you are traveling on a business trip.
Restaurant expenses must meet the following criteria in order to be a deduction:
- The meal is for a client or customer for promoting or discussing business
- There is an expectation of receiving a benefit, such as getting the person to become a client
- Documentation of expenses in the form of receipts is necessary
The IRS allows a 50 percent deduction for costs of meals unless the incident "is" your business. For example, a theater critic is entitled to a 100 percent deduction while attending a performance since this would be a part of his job. Likewise, a 100 percent deduction is allowed for any donations to an event that is promoting your business or promoting goodwill to the community. For example, a pizza restaurant donating pizza and water to participants in a benefit race would get a 100 percent deduction for that cost.
The most important thing to remember is that documentation is extremely important. Without the proper documentation, the IRS may not allow the deduction or may make its own estimate which can be considerably lower that what your deduction is, and therefore cause you to pay interest and penalties.