Meals & Entertainment Deductions for Transportation Companies

Feb 2, 2017Business Tax, Transportation

Do you know what is tax deductible in relation to meals and entertainment expenses?

Many of our transportation company clients like to entertain. Whether it is taking a business client to lunch or throwing a company picnic for employees, you may be entitled to deduct the entire cost of the activity.

The General Rule. Meals and entertainment expenses are only 50 percent deductible on your tax return. 

Example: Bill takes several clients to a restaurant where he pays $20 for a separate dining room, $200 for food and beverages and $30 for a tip. All of the costs relating to the business meal, including the charge for the separate dining room, must be reduced by 50 percent. Thus, Bill’s deduction is $125 for the meal (50 percent x $250 charges for meal, tip and room).
 
Many transportation companies fail to realize there are numerous exceptions to the 50 percent rule and these exceptions may be particularly beneficial. Below are some exceptions:

100 percent Deductible Expenses

If meals or entertainment are provided for the benefit of your employees, you may write off 100 percent of the cost as a business expense. Common examples include:

  • Meal and entertainment expense for a company picnic or holiday party.
  • Free coffee or bottled water provided to employees at the place of business.
  • Free food or beverages provided to the public for promotional purposes.
  • Meals provided at the place of business to more than half of the employees for the benefit of the employer. 

80 percent Deductible Expenses

If your company employs interstate truck operators or bus drivers, who are under Department of Transportation regulations, you may deduct 80 percent of their expenses for meals while traveling away from home.
 

Reminder: ALL deductions MUST BE business related and the IRS requires you to provide written proof of an expense. You must be able to establish the amount spent, business purpose and business relationship of the individuals involved.

Transportation has been a key practice area of Smith Schafer’s for more than 45 years. We have qualified professionals to assist you with identifying and claiming these deductions. For more information on tax strategies that may benefit your business contact the Smith Schafer Transportation Team.

Also published in:

Minnesota School Bus Operators Association Newsletter

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