July 29, 2024
What Counts as a Business Meal?
Under the Canadian Income Tax Act, a business meal can be deducted from your taxes if it meets these criteria:
Purpose: The meal must be for a business reason. Think meetings with clients, potential customers, consultants, or employees where you discuss business stuff like activities, strategies, or projects.
Setting: The meal should happen in a place good for business talks, not your usual work spot. This could be during business travel, at a restaurant, or even a catered meeting.
Documentation: Keep good records! You need receipts that show the expense, who was there, their relationship to you, and why you had the meal.
Reasonableness: The cost should be reasonable, not over-the-top fancy.
What Doesn’t Count as a Business Meal?
Personal Meals: These are meals you eat just because you’re hungry, not for business. Regular work-hour meals without business discussions or meals alone don’t count.
Business Meal Deductions
The CRA says you can claim up to 50% of your food, beverage, and entertainment expenses, based on the actual cost or a reasonable amount, whichever is less. This helps ensure only legitimate business meals get deducted.
Meals During Business Travel
When you travel for work, meals are still subject to the 50% deduction limit. This includes meals at conferences, client meetings out of town, or even on a plane, train, or bus if the meal isn’t part of your ticket price.
Special Cases and Exceptions
More Than 50% Deductible: Sometimes, you can claim more than 50%. For example:
- Long-haul truck drivers can claim 80% of their food expenses.
- Self-employed couriers and rickshaw drivers can deduct extra food costs due to their physically demanding jobs, with a flat daily rate set by the CRA.
100% Deductible Situations: Some meals can be fully deducted, like:
- Meals as compensation to customers if your business is all about providing meals or entertainment (e.g., restaurants).
- Meals billed directly to a client and itemized on their invoice.
- Company-wide events like office parties, with all employees invited (up to 6 events per year).
- Meals included in an employee’s income.
- Meals for employees at temporary work camps at construction sites who can’t go home daily.
GST/HST Considerations
For GST/HST registrants, the input tax credit for meals and entertainment expenses is limited to the deductible portion for income tax, usually 50% of the GST or HST paid.
Understanding these rules can save you money! Stick to CRA guidelines, claim what you can, and make sure your business meals work for your bottom line.
