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

So how do you know which of your food and beverage expenses are deductible? We started breaking it down in Part I and Part II of this series. Now let's discuss four final scenarios involving Aaron and his two companies, Northwinds and Triad.

Employee break room

Northwinds provides employees with free coffee, soda, bottled water, chips, donuts, and other snacks in a break room and spends $2,200 per year on these snacks. How much of the $2,200 is deductible?

The break room is not a recreational or social activity, primarily for the employees' benefit (as would be the case with a holiday party), so the company may deduct only 50% of the expenses for food and beverages provided in the break room, or $1,100.

Emergency workers employee meals

Northwinds has a written policy that employees in certain medical services-related positions must be available for frequent emergency calls. Because these emergencies can and do occur during meal periods, Northwinds furnishes food and beverages to employees in this position without charge in a cafeteria on the business premises.

Northwinds excludes food and beverage expenses from their employee's income, since the meals are provided for the employer’s convenience. What percentage of these food and beverage expenses is deductible by Northwinds?

Because these food and beverages provided are for the employer's convenience, Northwinds may deduct 50% of the food and beverage expenses.

Waiting area refreshments

Northwinds provides refreshments in its waiting area. Employees and customers consume the refreshments, and the company estimates that customers consume more than 50% of the refreshments. Northwinds spends $2,800 per year on these refreshments. How much of the $2,800 is deductible?

Since customers primarily consume the food and beverages, Northwinds may deduct 100% of the food and beverage expenses, totaling $2,800.

Food and beverages for sale

Aaron's other business, Triad, is a restaurant that provides food and beverages to its food service employees before, during, and after their shifts at no cost to its employees on the restaurant premises. What percentage of these food and beverage expenses is deductible by Triad? Do the employees recognize income for the food and beverages?

The food and beverage expenses are 100% deductible to Triad. This is allowed since the restaurant sells food and beverages to customers as part of their regular restaurant business.

The value of the food and beverages is also excluded from the employee's income. A meal furnished to a restaurant employee for each meal period in which the employee works is considered for the convenience of the employer and is not recognized as income.

Want to make sure you aren't missing any deductions? Click here to learn more about our tax and accounting services.

Contact us: 
[email protected] | CA (760) 888-6247 | NY (845) 237-4060

Want to work with us? Click here for Career Opportunities with Gold Standard Tax

Copyright © Gold Standard Tax & Accounting. All Rights Reserved.