Business Meal Deduction: What Phoenix Business Owners Should Know
As a financial advisor in Phoenix working with small business owners, I’m often asked about the business meal deduction. Can you write off a lunch meeting with a client? How much is deductible, and what counts as a business expense? The IRS allows certain meal costs to be deducted, helping business owners legally reduce taxable income. But the rules are strict, and missteps can lead to denied deductions or audits. If you’re an entrepreneur, especially in Phoenix, understanding how the business meal deduction works is an easy way to keep more of what you earn.
What Is the Business Meal Deduction?
The business meal deduction allows businesses to deduct a portion of the cost of meals incurred during business activities. These could include client meetings, meals while traveling for work, or dinners with prospects to discuss business opportunities.
As of 2023 and 2024, most business meals are 50% deductible, though there was a temporary 100% deduction allowed during COVID relief years (2021–2022) for restaurant meals. That has now expired.
What Qualifies as a Deductible Business Meal?
To qualify, a business meal must meet three main criteria:
An ordinary and necessary expense: The meal must be directly related to the active conduct of your trade or business.
The taxpayer is present: You must be there in person. Sending a client a gift card to a restaurant doesn’t count.
A business discussion occurs: There must be a clear business purpose, and the conversation must take place before, during, or soon after the meal.
Common Deductible Business Meal Scenarios
Here are examples of meals that are typically 50% deductible:
Taking a client to lunch to discuss a new contract
Meeting with a prospective partner at a restaurant
A dinner after a business seminar or industry event
Meals while traveling for business (not your daily commute)
Meals provided to employees, such as holiday parties or meals for the convenience of the employer (e.g., staying late to meet a deadline), can sometimes be 100% deductible.
What’s Not Deductible?
The IRS is very clear about what doesn’t count:
Personal meals not related to business
Lavish or extravagant expenses
Entertainment costs (e.g., sports tickets), even if food is served
Meals with family or friends without a business purpose
Keep in mind: just because a meal is with a client doesn't mean it's automatically deductible. The business discussion requirement must still be met.
Recordkeeping: The Key to Keeping Your Deductions
Documentation is everything. To support your deduction, keep records of:
The date and amount of the meal
The location
Who was present
The business purpose or topic discussed
Using an app or keeping a digital log helps, but even a note on the receipt can work. If you ever face an audit, these details can make or break your case.
Can You Deduct Coffee Meetings?
Yes, coffee counts—if it meets the same rules. A meeting at a local café to discuss business strategy or pitch a proposal is deductible (50%). Just don’t stretch it—grabbing coffee alone on the way to the office is not deductible.
Tips for Maximizing the Business Meal Deduction
Separate your meal expenses: Use a dedicated business card to keep records clean.
Avoid combining meals and entertainment: Entertainment is no longer deductible, even if it involves clients.
Consult with a tax advisor: If you entertain clients regularly or travel for work, a customized tax strategy can help.
Final Thoughts
The business meal deduction isn’t huge, but it adds up over time—especially if you're meeting with clients or referral partners regularly. At Cool Wealth Management in Phoenix, we help business owners keep more of what they make through smart tax strategies like this. By staying within IRS guidelines and documenting your expenses, you can deduct meals with confidence and reduce your taxable income year after year.
