How to categorize meals for employees
Employee meal expenses cover the cost of food and beverages provided to staff for business-related purposes. These can include team lunches, travel meals, or occasional in-office snacks. Properly categorizing these expenses ensures compliance with IRS deduction limits and helps your business claim the maximum allowable benefit.
What are employee meal expenses?
Employee meal expenses include any costs your business incurs when providing food or drinks to employees as part of normal operations. This can range from meals during business travel to staff lunches meant to boost morale or support meetings. How you categorize and deduct these expenses depends on the context in which they’re provided.
How to categorize employee meal expenses
- Record under Operating Expenses in your income statement.
- Use a “Meals and Entertainment” or “Employee Meals” account in your chart of accounts.
- Separate 100% deductible meals (e.g., company parties or meals for employee convenience) from 50% deductible meals (e.g., business travel or client meetings).
- For travel meals, record them separately under “Travel and Meals” for easier tax reporting.
- Maintain clear records showing the purpose, attendees, and amount of each meal expense.
Examples of employee meal expenses
- Office Meals: Food provided to employees working late or through lunch hours.
- Business Travel: Meals purchased by employees while traveling for work.
- Team Events: Catered lunches, off-site gatherings, or employee appreciation meals.
- Company Parties: Holiday celebrations or team-building events.
- Client Meetings: Meals shared with clients or partners for business purposes.
Tax implications for employee meal expenses
- Meals provided for the convenience of the employer (e.g., during overtime or emergencies) are generally 100% deductible.
- Meals for business travel, client meetings, or general staff lunches are typically 50% deductible.
- Meals that qualify as entertainment (e.g., concert tickets or non-work outings) are not deductible unless they meet specific IRS business criteria.
- Keep receipts that list the restaurant name, date, total amount, and business purpose.
- Track employee reimbursements separately; if reimbursed under an accountable plan, the cost remains deductible to the business.
- Deduction rules may vary by year; always check the latest IRS guidelines for current limits.
