How to Deduct 100% of Your Meal and Entertainment Expenses

How to Deduct 100% of Your Meal and Entertainment Expenses

3 min read
Amanda Han

Amanda Han has been a CPA specializing in tax strategies for real estate, self-directed investing, and individual tax planning for over 18 years. She’s been investing in real estate herself for over 10 years with a focus on long-term hold residential and multifamily assets across multiple states.

Experience
As both a tax strategist and real estate investor, Amanda combines her passion of real estate investing with her expertise in tax. Her goal is to help investors with strategies designed to supercharge their wealth-building using entity structuring, self-directed investing, and income offset opportunities to keep more of what they make.

Her highly rated book Tax Strategies for the Savvy Real Estate Investor is amongst Amazon’s bestseller list. Amanda is also a frequent contributor, speaker, and educator to some of the nation’s top investment and self-directed IRA companies.

Amanda and her husband Matt MacFarland have a passion for animals and founded Animals for Armed Forces, a non-profit organization that has helped to place over 1,800 shelter pets with forever homes.

Press
Her cutting-edge tax strategies have been featured in prominent publications, including Money Magazine, Realtor.com, and AllBusiness.com. Amanda was a speaker at “Talks at Google” that features influential thinkers and creators. Amanda has also appeared in CNBC’s Smart Money Talk Radio, as well as BiggerPockets podcasts.

She is a 40 under 40 honoree by CPA Practice Advisor, showcased amongst the best and brightest talent in the accounting profession. Her firm Keystone CPA, Inc. was awarded a two-time winner of the Top CPA of Orange County Award by OC Metro Magazine.

Accreditations
She is certified by the CA State Board of Accountancy and is a member of the prestigious American Institute of Certified Public Accountants (AICPA) with clients across the nation.

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Many investors are bothered by the fact that they can’t deduct their full expenses for meals. You take your client out to lunch or buy yourself dinner when traveling, but at the end of the day you can only write off 50% of the cost. It’s a legitimate business expense, so why is it only partially deductible?

The theory behind the rule is that you would be eating that meal whether it was business related or not, so the IRS only lets you deduct half of your meal expenses. There are, however, a few ways to get around this rule and deduct 100% of most of your meal and entertainment expenses, if you plan accordingly!

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Related: 5 Tips For Maximizing Your Tax Income Deductions For NEXT Year

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Who doesn’t love a good open house? There is always something exciting about entering into someone else’s home to see how they live and to find inspiration on how to make a house a home, and even if the house isn’t great, the food usually is. Nowadays, it is common to see people do some crazy things at open houses. From catered food to musical appearances, these open house “parties” can get expensive quickly.

We have a client named Mike, who is one of these “party” hosts. His open houses always include tons of food, tons of alcohol, and tons of people. No one wants to throw a lame open house, and Mike makes sure he doesn’t. Plus, his events bring in not only potential buyers, but also potential investors. The only downside is that he spends quite a bit of money on these exciting open houses, mostly in the food and drink department. Luckily for him, he is able to write off all of his costs.

A small loophole for meal expenses is that if the meal is provided to the general public, then 100% of it can be tax deductible. Generally, when you have an open house, you want everyone to show up. You put advertisements online and signs around town because you never know where your next buyer will come from. It could be someone driving by who saw your sign or someone visiting of the neighbors down the street.

I’m sure some of you are wondering if the alcohol is deductible too, and usually in the case of open houses, it is! In addition to the usual hors d’oeuvres and finger sandwiches, beer, wine, and other alcohol provided at an open house are also generally tax deductible.

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Club Meetings

Another way to deduct a higher percentage of your meals and entertainment expenses is to own your own real estate club!

Related: 3 Reasons You Should LOVE the Home Office Tax Deduction

Tom is a client of ours who is involved in some real estate syndication deals. He meets different investors at local REIA meetings, and they meet up occasionally to discuss their ventures and to see how their business deals are going. Tom quickly realized that one of the fastest ways for him to network with investors and be seen as a trusted resource is to actually open a real estate club of his own. Instead of driving all around to attend other people’s clubs, he started a local REIA of his own. He invited speakers and quickly grew his database to a respectable size.

Tom’s real estate club is open to the general public, and the food and drinks are available to everyone who attends, so Tom is able to fully deduct the cost of his meals and entertainment expenses for the club meetings without any limitations from the IRS.

Seems easy, right? Just a few minor adjustments, and your meal expenses are fully deductible! There are, however, a few things to keep in mind when setting up your events. First, be sure to keep documentation for any expense over $75, so don’t lose those grocery receipts. Second, make sure that you can prove that your events are legitimate business functions. Hang onto your ad in the paper for your open house or a copy of the meeting agenda for your investor dinner. The IRS will need you to be able to prove that these are business expenses and not just regular parties.

So, as you can see, just one small change could be the difference between a 50% and a 100% deduction. Make sure that when meetings and open houses roll around, you’re taking advantage of loopholes so that you can deduct every penny of your “party” expenses. At the end of the day, you are trying to make a profit and grow your business, and if Uncle Sam is helping to pay for your “party,” why not spend a bit extra to ensure that you have a great one?

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