Not all food and beverage expenses are created equal! Some are non-deductible, some are 50% deductible, and others 100% deductible.

So how do you know which of your food and beverage expenses are deductible? We started breaking it down in Part I of this series. Now let's discuss a few more scenarios involving Aaron and his company Northwinds.

Travel meals

Aaron and his spouse, Susan, travel from New York to Boston to attend a series of business meetings related to his business. Susan is not an employee of the business and does not travel to Boston for business purposes.

While in Boston, Aaron and Susan go out to dinner. They spend $200 on food and beverages, with the costs equally divided. How much of the $200 is deductible?

Susan’s meal expenses of $100 are nondeductible, while 50% of Aaron’s meal expenses are deductible. Therefore, Aaron's mean deduction is $50.

Employee cafeteria

Northwinds provides food and beverages to its employees without charge at a company cafeteria on its premises. The food and beverages are not a de minimis fringe benefit. De minimis fringe benefits are little freebies a company gives out, like an occasional pizza party, and are not usually taxed. However, Northwinds treats the full fair market value of the food and beverage they provide as wage compensation to the employees. How much of the food and beverage expenses are deductible?

Northwinds can deduct 100% of the food and beverage expenses because their value was taxable compensation to the employees.

Different employer cafeteria

If Northwinds provides meals for its employees without charge, and the meals are properly excluded from their income as meals provided for the employer's convenience, how much of the food and beverage expenses are deductible?

Northwinds would be able to deduct 50% of the food and beverage expenses.

Accountable plan reimbursement

Aaron reimburses his employee $130 for food and beverage expenses while away from home on business travel. The reimbursement was made under an accountable plan and is excluded from the employee's income. How much of the $130 is
deductible?

50% of the food and beverage expenses are deductible, totaling $65.

Employee holiday party

Aaron invites all his employees to a holiday party in a hotel ballroom. The party costs $2,500 and includes a buffet dinner and an open bar. How much of the $2,500 is deductible?

Since the holiday party is a recreational or social activity primarily for the benefit of non-highly compensated employees, both the facility costs and the food and beverage expenses are 100% deductible.

Want to make sure you aren't missing any deductions? Click here to read Part III in this series.

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