1/29/19 This post has been updated. See Yes, You Can Still Write Off Business Meals.
Whenever I mention to a colleague that we can no longer write off business meals, they stop and stare at me. Then they say, “What?” like they must not have heard me right.
But it’s true. All those restaurant meals you enjoy with fellow food bloggers, cookbook authors, recipe developers, chefs you know, etc. are no longer eligible for a 50 percent write off, with some exceptions.
For clarification about this new American law, and about what we as food writers can deduct, I turned to Stephen Hoffman. Steve does 700 tax returns per year and is also an award-winning food writer. (In fact, he is up for four Association of Food Journalists food-writing awards for articles in the Minneapolis Star Tribune and a Twin Cities magazine called the Growler. Currently he’s writing a book on the story of his family’s extended stay in a village in France. You can follow him on Instagram at @sjrhoffman.)
Here’s what tax expert Stephen Hoffman says about our ability to write off business meals from our taxes:
Q. Is it really true, Steve?
A. Yes Employees — those who are not sole proprietors or small business owners — can no longer write off meals, travel or mileage at all. They have to be reimbursed. Business owners can no longer write off meals and entertainment, with some exceptions.
Of course, business meals were only 50 percent deductible before. So if you paid $100 for a business meal, the actual dollar savings was fairly small. It might have come to a $15 to $17 savings in taxes. All told, we’re talking maybe a few hundred dollars of actual tax savings per year for most people.
So it might not be worth a lot of hoop jumping in the end to find workarounds, unless you’re wining and dining many people to the tune of many thousands of dollars.
And I’d advise everyone to keep the receipts anyway, in case the rules are clarified in your favor.
Q. What does the government define as “entertainment?”
A. Footing the bill for an event. It could be tickets to a talk, the theatre, a movie, or sporting event. Those are no longer deductible.
Q. And we can no longer invite a business associate to our homes and write off the groceries we used to make the meal?
A. Correct.
Q. We can, however, write off business meals when we’re travelling overnight, away from home, correct?
A. Yes.
Q. And we can still take a business associate or colleague to dinner while travelling, and write off that meal, right?
A. Yes, I would say so, in most cases.
Q. Can we can go on vacation and write off business meals while there?
A. Potentially, even if your primary reason for travel is personal.
You can legitimately have a business day or two in the midst of an otherwise personal trip. Keep records of your business meals. Put the meal on your calendar and write the ostensible business reason why you met.
Q. If a food critic dines at a restaurant as her work as a restaurant reviewer, can she write off the meal?
A. Yes. The meal is 100 percent deductible, in my view. Any amount of time spent there for research is deducible.
Stephen Hoffman, who spends half the year doing taxes and the other half as a food writer, says to go out for a meal anyway, even if you can’t write it off..
Q. Have you figured out any workarounds?
A. A research lunch is a slightly sneaky workaround, if it is plausible that it was feeding into some other work you are doing, pitching, or have been assigned. But I wouldn’t do that all the time.
Q. During the IACP webinar you gave about taxes, you said something about using gift cards. If, at dinner, I gave my business associate a gift card to use at the restaurant, would I be able to write off the gift card?
A. Yes, if you limited yourself to one $25 gift per person per year. That could be an occasional workaround.
Q. Now for some general questions. People who are cooking and baking for their food blogs can still write off applicable groceries, right?
A. Correct.
Q. Can a recipe developer write off all restaurant meals or groceries because they might be inspired to create a recipe or write about that food?
A. In some circumstances, yes.
Much of this comes down to whether you can make this argument with a straight face across the desk from an auditor. If you go to several French restaurants because you are researching recipes for a French cookbook, for example, that’s probably deductible. But you would need to show that you plan to write that cookbook.
Some people in our business need to broadly educate themselves about food trends and techniques. They might — and do — argue that they can’t go to any restaurant without thinking about recipes, and that therefore effectively all of their dining and food cost is deductible. But most auditors would overrule that argument, if you were audited.
Q. What else would you advise?
A. Here’s what it comes down to. For some people, the worst nightmare in their lives is to get audited. If that’s you, you should be conservative and document heavily.
Others don’t lose any sleep over it. They allow themselves to be aggressive in the grey areas of the tax code that involve judgement calls. They know what the consequences are: In smaller cases you would owe the tax plus interest and penalty on the balance due, which comes to 12 percent annual interest over no more than three years. There could be an additional larger penalty for substantial underreporting of more than 25 percent. You can’t go to jail, except for bigger cases of fraud. You’ll just owe money.
So I guess I would summarize by saying that this new rule is a minor blow to many people in our industry, but there are also some advantages for small business people under the new 2018 tax rules that may offset much or all of the loss from the elimination of the Meals and Entertainment deduction.
Q. So we should still keep going out to lunch and dinner with colleagues?
A. Purely from a business and career development perspective, we should still go out to lunch and dinner with people, and still network and interview and generally talk business, and pick up the tab every now and then. Our business is about connections and there is maybe no better setting for making connections than around a table over a few courses of good food. Offering a meal is a form of hospitality that should still be part of our character as an industry, whether or not that restaurant bill is deductible on a Schedule C.
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Disclaimer: This post is for general information only. Please consult your tax preparer regarding your own situation.
It’s all so subjective. I chatted with Stephen too, after the talk (which was one of the best at IACP). But then I spoke with my own tax guy, as well as another. And they all had slightly different interpretations of the same laws. It really is a gray area in a lot of cases. And as he says, it’s all what you feel comfortable about.
Yes, that’s the bottom line. My husband was audited over a 3-year period and paid a heavy fine (for an investment that turned out to be delegit), so based on his story, I don’t want to go anywhere near an audit. I’m staying on the conservative side.
I was just listening to a Food Blogger Pro podcast last week with an interview with an accountant and I was sure he said meals could be deducted. I’ll have to go back and give it another listen.
Thanks!
Yes please do. They can be deducted under some circumstances, as Steve explains.
“Q. Now for some general questions. People who are cooking and baking for their food blogs can still write off applicable groceries, right?”
As long as the blog is a for-profit venture and makes a profit in at least 3 of the last 5 years or it’s just considered a hobby. You can’t just start a blog and write off all the meals you prepare and write about.
Yes good point, David. We should have included that. Most food bloggers are still hobbyists.
I thought Stephen clearly described the tax situation. And then I read the two articles you linked to and was just blown away by his luminous, lilting prose! Talk about an ambidextrous right brain and left brain! Best of luck, Stephen at the AFJ conference!