If you’re a sole proprietor, you can deduct ordinary and necessary business meals and entertainment expenses. However, these expenses must be directly related to or associated with your business. If you’re an employee, you can deduct these only to the extent your employer doesn’t reimburse you.
Entertainment includes an activity that provides:
- Recreation, including meals you bought your customer or client
To meet the directly-related requirement, you must show all of these:
- The main purpose of the entertainment was the conduct of business.
- You engaged in business during the entertainment period.
- You expected to get income or some other business benefit.
Your expense might not meet the directly-related requirement. If so, you might be able to deduct a meal or entertainment expense if you can meet the associated test. This test requires both of these to be true:
- The expense is associated with the active conduct of a trade or business. So, the expense must have a clear business purpose, like:
- Getting new business
- Encouraging the continuation of an existing business relationship
- You discuss a substantial amount of business before, during, or