Meal and Travel Expenses

Most usually, meal expenses are limited to 50% of the expense. When providing meals and entertainment to clients the following rules apply.

1. entertaining clients must be directly related to or associated with the active conduct of business such as discussing deals before, during or after the meals
2. the taxpayer or employee must present when the meal or entertainment occur
3. if a group or business acquaintances take turns picking up the tab whether business activity occurs or not, the expense cannot be deductible
4. lavish or extravagant meals and entertainment are not deductible
5. only the cost of face value of a ticket is deductible

Travel primarily for business outside the United States is prorated on the expense for personal and business. If all travel is for business then the entire expense is deductible, however, if some is for personal purposes, then that % is a nondeductible expense. For instance, if a taxpayer travels outside the US for 30 days and 15 days are for business purposes, then 50% of the trip cost is deductible.