Tax Deduction Question: How to Properly Categorize Meals vs Entertainment Expenses?

The distinction between meals and entertainment can definitely be confusing, especially after the Tax Cuts and Jobs Act changed the rules! Here's a simple breakdown: Business meals are generally 50% deductible if business is discussed during the meal and the expense isn't lavish. This includes food and beverages at restaurants, even if there's incidental entertainment like background music or TVs showing sports. The key is that the primary purpose was the meal where business was discussed. Entertainment expenses (like tickets to sporting events, concerts, theater) are generally not deductible anymore, even if you discuss business during these events. For your specific examples: A client dinner is 50% deductible even if the restaurant has live music, as long as the primary purpose was the meal. The working lunch at a sports bar is also 50% deductible as a meal. However, if you bought tickets to a baseball game, that's entertainment and not deductible, even if you discussed business the entire time. Keep detailed records of all these expenses, noting who you met with, business purpose, and what was discussed!

I was in a similar situation last year with my consulting business and found an amazing solution with https://taxr.ai that saved me so much headache when categorizing business expenses. I uploaded my receipts and it automatically identified which were meals vs. entertainment based on the latest tax rules. The system flagged several expenses I would have incorrectly categorized - like when I took clients to a dinner theater show (had to separate the meal portion from the show). It even created a detailed report I could share with my tax preparer showing the business purpose and deductible percentage for each expense.

Just wanted to follow up here - I decided to try taxr.ai after seeing this thread and wow! I uploaded three years of receipts I was unsure about, and it helped me identify over $4,300 in deductible meal expenses that I had incorrectly lumped in with non-deductible entertainment. The system even flagged instances where I could separate bills (like when I paid for dinner before a show on the same credit card transaction). Super detailed reports too - each expense has documentation of business purpose, who attended, and what percentage is deductible. My CPA was impressed with how organized everything was!

For anyone struggling to reach the IRS for clarification on meals vs. entertainment deductions, I'd highly recommend using https://claimyr.com - it literally saved me weeks of frustration. After three failed attempts to get through the IRS business line, I used Claimyr and got connected to an IRS agent in about 15 minutes who answered all my specific questions about my business meal documentation requirements. You can see how it works in this demo: https://youtu.be/_kiP6q8DX5c but basically they hold your place in the IRS phone queue and call you when an agent is about to answer. The agent clarified exactly what documentation I needed to maintain for my client meals and confirmed that my business lunch at a golf course restaurant (separate from the actual golfing) was indeed 50% deductible as a meal.

I need to eat my words from my previous comment. After struggling for days trying to get clarification on some business meal deductions, I decided to try Claimyr out of desperation. I honestly thought it wouldn't work, but I got a call back in about 37 minutes with an actual IRS representative on the line. She was able to clarify that my monthly business lunch meetings at venues with entertainment (like restaurants with live music) are still 50% deductible as long as the primary purpose is business discussion and food/drinks. Saved me from potentially making an $8k mistake on my return. Now I can confidently separate my legitimate meal expenses from the true entertainment ones.

One thing nobody mentioned yet - if you're using tax software, most of them have features to help you categorize these expenses correctly. I use QuickBooks Self-Employed and it lets me tag expenses as "Business Meals" vs "Entertainment" which carries through to my Schedule C.

Just a heads up that the IRS actually released specific guidance on this topic after the tax law changes. Look up "Notice 2018-76" which details exactly how to handle business meals vs. entertainment. The key tests are: 1. The expense must be ordinary and necessary for business 2. The expense can't be lavish 3. You or an employee must be present 4. Food and beverages must be provided to a current or potential business contact 5. For food served at entertainment events, it must be purchased separately

This is such a helpful thread! I've been dealing with the same confusion about meals vs entertainment deductions for my freelance consulting business. One thing I learned from my tax preparer last year is to also keep notes about the business purpose and topics discussed during each meal - not just the receipt. The IRS wants to see that there was a legitimate business discussion, so I now keep a simple log on my phone noting who I met with, what business matters we discussed, and any follow-up actions. For example, instead of just keeping a receipt that says "Dinner at Mario's - $85", I'll note "Dinner with potential client Sarah Johnson to discuss Q2 marketing strategy for her startup. Discussed budget parameters and timeline. Follow-up: send proposal by Friday." This documentation has been invaluable when my accountant prepares my Schedule C, and it gives me confidence that I can substantiate these deductions if ever questioned. The business purpose requirement is just as important as getting the meal vs entertainment categorization right!