Latest update: February 19, 2025 - 5 min read
Meal and Entertainment Deductions Guide
Due to the Tax Cuts and Jobs Act (TCJA), small businesses and self-employed people can’t deduct most business entertainment expenses – such as sports event tickets, club fees, and recreational activities.
Business meals can still qualify for at least a 50% deduction if they meet all the IRS requirements and you keep proper documentation.
Generally, we can break down what’s deductible and to what extent with the table below. Specific rules and exceptions still apply, so keep reading for more information.
| Expense | Deduction |
| Client entertainment (sports tickets, concerts, etc.) | 0% |
| Business meals with clients | 50% |
| Office meals and snacks | 50% |
| Company-wide parties and events | 100% |
| Employee meals (accounted for in their compensation) | 100% |
IRS rules on business entertainment expenses
The IRS defines entertainment expenses as those related to recreation, entertainment, or amusement.
Think of activities such as:
- Taking clients to sports or cultural events
- Paying club membership fees
- Playing sports
- Using entertainment facilities
While these expenses were 50% deductible before 2018, they’re now mostly non-deductible until at least 2026.
Exceptions
You can qualify for a 100% deduction if one of these exceptions applies:
- The expenses resulted from selling entertainment to your customers.
- You paid for company-wide employee recreation, including picnics and parties.
- The entertainment expenses were related to an event at an exempt organization, such as a professional association or business league.
- The entertainment counts as part of employee compensation.
IRS rules on deducting meal expenses
Meals (including beverages, food, related taxes, and tips) are another part of entertainment. These expenses are typically 50% deductible if you can meet the following criteria showing a business connection:
- The meal had a clear business purpose and benefit, such as keeping or getting a business client.
- You or an authorized representative, such as an employee, was present.
- You discussed business matters at the meeting.
IRS rules require that all deductible meal expenses be necessary, ordinary, and not lavish. You must also prove that the eligible meal expenses were separately billed from non-deductible entertainment expenses, such as sports or concert tickets.
Exceptions
You may be able to deduct 100% of eligible meal expenses in certain situations. Examples include meals bought for company-wide recreation events, included in employees’ compensation, or provided to customers for free.
Examples of deductible meal and entertainment expenses
- Standalone business meals with current or potential business contacts
- Eligible business meals at entertainment events, such as games and performances, but separately listed from non-deductible costs
- Events associated with exempt organizations
- Costs associated with entertainment provided to customers in your line of business
- Company-wide parties for your employees’ recreational benefit
- Employee meals that are accounted for in their compensation
Example: Say that you take two important clients to an opera and spend $125 on the tickets. After the performance, you all discuss business matters over a $50 meal at the venue’s restaurant. In that case, you could deduct half the business meal cost ($25) but not the $125 ticket entertainment expense.
Examples of non-deductible meal and entertainment expenses
You can’t write off the following types of meals and entertainment expenses:
- Tickets or private suite rentals for sports games, concerts, and other performances
- Local activities, such as museums, sightseeing tours, and cultural events
- Entertainment facility use, including rental fees (for renters) or operating costs and depreciation (for owners)
- Recreational outings to play sports, go camping, and similar leisure activities
- Initiation fees and yearly membership dues for most types of clubs
- Meals that aren’t separately billed or itemized from entertainment expenses
- Meals that have no clear business purpose or are extravagant
- Meals you’ve had by yourself
Example: Say you invite a potential client to spend the day playing golf and pay $50 in golf course fees. While playing together, you talk about your company and agree to a business deal, but you don’t have a meal together. You cannot deduct the $50 spent on the outing, even though it involved business.
Documenting your eligible expenses
To properly report meals and entertainment expenses on your tax return and have sufficient proof in case of IRS audits, you must keep detailed documentation throughout the year. This includes receipts, canceled checks, card or bank statements, and bills received.
You should also make a log with the following information for each expense:
- Name and location of the venue or restaurant
- Date of the activity or meal
- Names of all people who attended and their business relationship to you
- Purpose of the activity or meal and its connection to business
- Explanation of the business matters you discussed
- An itemized list of expenses
Keep records for at least 3 years from when you report them on your tax return. Check out our guide on how to track business expenses for more information.
How to write off meals and entertainment on your tax return
You must report your deductible meals and entertainment expenses on your Form 1040.
You’ll include the deductible portion of your business meals on Line 24b of Schedule C, Part II. Remember to consider whether the cost is 50% or 100% deductible, depending on your situation and the IRS rules.
If you do have deductible entertainment expenses, such as a company-wide employee party, you can provide information about each one in Part V, where miscellaneous business expenses go. You can then report the total amount of those other costs on Line 27a of Part II.
Don’t forget to write off your other eligible business expenses, such as employee wages, vehicle use, office expenses, supplies, and business travel. You can learn more in our small business tax deduction guide.
FAQ
The IRS defines an entertainment expense as one related to recreation, entertainment, or amusement. This can include entertaining business contacts at different activities, such as parties and local events, and having meals or drinks with them.
Like other types of businesses, a sole proprietor can’t deduct most entertainment expenses except for eligible business-related meals. However, the same exceptions apply for situations such as company-wide employee parties and entertainment expenses included in your employees’ compensation or paid as part of selling entertainment to customers.
The IRS currently limits you to deducting 50% of your eligible business meal expenses except in limited cases, such as employee parties, which can be fully deductible. You should have documentation reporting your meal costs separately from the entertainment costs.
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