Generally, businesses are limited to deducting 50% of allowable meal and entertainment (M&E) expenses. But certain expenses are 100% deductible, including expenses:
- For food and beverages furnished at the workplace primarily for employees
- Treated as employee compensation
- That are excludable from employees’ income as de minimis fringe benefits
- For recreational or social activities for employees, such as holiday parties
- Paid or incurred under a reimbursement or similar arrangement in connection with the performance of services.
If your company has substantial M&E expenses, you can reduce your tax bill by separately accounting for and documenting expenses that are 100% deductible. If doing so would create an administrative burden, you may be able to use statistical sampling methods to estimate the portion of M&E expenses that are fully deductible. For more information on how to take advantage of the 100% deduction, please contact us.