An employer can usually deduct the cost of
furnishing meals and lodging to employees if the expense is an ordinary
and necessary business expense. In general, the deduction for furnishing
meals is limited to 50% of the costs except under certain conditions.
Deduct 100% of cost of furnishing meals
for:
• Meals that qualify as a de minimis
fringe benefit. Includes all meals provided on the employer’s premises
for the convenience of the employer if more than 50% of the employees who
are furnished meals are furnished meals for the employer’s convenience.
Prior to 1998, "substantially all" of the meals provided to
employees had to be for the employer’s convenience. The current rules
apply for all tax years so employers may amend any open years.
• Meals where the value is included in the employee’s wage.
• Meals furnished to employees at the site of an employer’s restaurant
or catering service.
• Company picnics or holiday parties.
• Meals for crew members of a commercial vessel under a Federal law.
• Meals on an oil or gas platform or drilling rig located offshore or in
Alaska.
Exclusion from Employee Wages for Meals
and Lodging:
The value of meals and lodging is excluded from
an employee’s wages under the following rules:
1) Meals and lodging must be furnished on
the business premises,
2) Must be furnished for the employer’s convenience, and
3) For lodging only, employees must be required to accept the lodging as a
condition of employment.
De Minimis Fringe Benefit: Meals
that can be excluded from an employee’s wages under the exclusion rules
are treated as de minimis and are fully deductible by the employer. If
more than half the employees that are furnished meals meet the exclusion
rules, all meals provided to employees are treated as de minimis and are
fully deductible by the employer and excludable to the employee.
Employer’s Convenience: To meet
the employer’s convenience rule, meals must be provided for one of the
following reasons:
• Meals are provided so employees are
available for emergency calls during the meal period, and such calls
actually occur or can reasonably be expected to occur.
• Meal periods must be short (30 to 45 minutes) because of the nature of
the employer’s business and the employee does not have time to eat
elsewhere. Short meal periods to allow employees to go home early do not
qualify.
• Because of a lack of eating facilities near the business, employees cannot be expected to secure proper
meals within a reasonable meal period.
• Meals furnished to restaurant or other food service employees during
working hours.
• Meals furnished immediately after working hours that would have been
provided during business hours but because of work duties, were not eaten
during working hours.
