A Guide to Meals and Entertainment Deductions in 2024

A Guide to Meals and Entertainment Deductions in 2024

You may have genuinely wondered about the rationale behind meal and entertainment tracking and deductions. This is a great way to reclaim tax and build up your savings as much as possible. Check out a guide to meals and entertainment deductions.

Some factors are put in perspective when considering meal and entertainment deductions. The business situation and the setting around the entertainment are the major considerations.

Meal expenses are the money that covers food and beverages. The entertainment expenses relate to hotel bills, tickets to ball games, and much more. The claims may be up to 50%, 80%, or 100%.

The subject of meal and entertainment deductions is often a grey area. Reading this, however, will help you understand the rationale behind it.

What are meal and entertainment deductions?

Meals are essentially food and drinks, which may come as breakfast, lunch, dinner, or even snacks. Meal expenses are the cost of getting or purchasing the meals. It often includes delivery tax, sales tax, and tips. The same applies to entertainment. It is any activity involved for fun or to relax.

It is often noted if the meals or entertainment done are related to your business or on a personal basis. In the past, meal, and entertainment deductions were lumped together. In recent times, they have been separated.

kingsmen capital investments promo banner - comparewise

The Canadian Regulatory Agency guidelines on meals and entertainment expenses

There are rules created by the Canadian Regulatory Agency concerning meal and entertainment expenses. The rule is that the percentage deductible is limited to the lesser of the following amounts:

  • 50% of the amount you actually incurred. It also has to be deemed reasonable under the circumstances.
  • The amount of money that you paid for some costs
  • The sum of money that seems fair to you in a given circumstance

Special Areas for 100% Claims and Deductions

You can claim 100% in some special cases. Here, the 50% rule does not apply. Examples are

  • For hotels or restaurants that use meals or other forms of entertainment as compensation
  • If your customers or clients are billed for the meal and entertainment services, and it is evidenced by the bill.
  • An inclusion of entertainment and meal expenses in your employee’s salary. Your 100% claim is made possible if the employees do not work in a special or remote location.
  • For special meetings like conventions or seminars.
  • If your work or event location is 30 kilometres from the closest urban centre.
  • Meals and entertainment for a fundraiser done to benefit a charity organization. The charity has to be compulsorily registered and emphasis is placed on it being a fundraiser. It should not be part of the activities that the charity organizes to achieve its objectives.
  • Bus, plane, or train trips where lodging, food, and activities are all included in the price of the trip.
  • Meal and entertainment expenses are incurred for programs like Christmas parties or events that are similar. Hosting your employees in a rented hall or restaurant at a particular location gives freedom for 100% claims.

Special Areas for 50% Claims and Deductions

You can claim 50% of the meal and entertainment expenses in the following situations

  • Meals are provided for employees that are kept in a working environment like a construction site on a temporary basis.
  • Trips are undertaken by boat, ferry or ship. Claims can only be made to 50% of any food, beverages, and/or entertainment.
  • Greater than six special events like conferences or office parties in one year.
  • You’re throwing a party for the company’s top brass, and it’s invite-only.
  • Cost incurred in getting a tour guide or in some cases, a security personnel security for a business client.

What is the verdict for conventions and seminars?

For conferences, seminars, and other business meetings, the meal expenses slightly differ. You can’t claim the costs of snacks and beverages like pies, muffins, coffee, or tea.

If it is a conference without specific costs allocated to meals and entertainment, you can claim $50 daily. This is a meal and entertainment expense. The 50% limit, however, plays a role here, and you get to claim only $25, which is half of $50.

According to the Canadian Regulatory Agency (CRA), at a convention or seminar, the registration fees are different. It is actually what is left after the money for food, beverages, and entertainment is deducted. What this simply means is that the claims you make are to be deducted from the conference fee.

Businesses With Special Entertainment and Meal Deduction Rules

There are specific businesses that give room for meal and entertainment expense claims.

A great example of the above-mentioned business is restaurants. As earlier written, 100% claims can be made for restaurants that supply food, beverages, and entertainment during business hours.

Up to 80% of the cost of food and drinks purchased by long-haul truck drivers can be deducted from their taxable income. The travel period refers to a minimum of 24 hours from their residential area and up to 160 kilometres away. 

Rickshaw drivers and couriers who work with their bicycles or by foot can claim the money they use for meals. They can either claim the expenses or have a daily fixed rate of $17.50. This is essentially for both food and drinks and has to be within the 8-hour normal working hours.

CRA allowable meals

Examples of allowable Meals & Entertainment Expenses that are listed as approved by Canadian Regulatory Agency include

  • Leisure activities like boat cruises
  • Tickets to attend sporting events, music concerts, theatre, fashion shows and more.
  • Guest entertainment at events like clubs and other hospitality situations.
  • Private boxes in music and sports shows.
  • Hotel room rentals
  • Meals are taken with employees or customers
  • It is important to note that gratuities, tips to service providers, and, most importantly, taxes are incorporated into entertainment expenses.

CRA non-allowable meals

There are expenses that are not allowable as meal and entertainment deductions. This simply means that it cannot be claimed as a tax deduction. The reason behind this is to create boundaries for businesses. It automatically includes the meals and entertainment deductions that are incurred by the business.

The list includes

  • Meals while on vacation.
  • Meals had while outside a sales territory.
  • Season tickets for some sporting events. The caveat is that there has to be proof that the tickets are a promotional expense.
  • Recreational club membership dues or continuation dues.
A Guide to Meals and Entertainment Deductions - Comparewise

How to claim meals and entertainment expenses

Claiming meals and entertainment expenses can happen as a sole proprietor, business partner, or corporation.

As a partner or sole proprietor, the claims happen under operating expenses (8523). When filing your taxes using the T1 format, you must include a Statement of Business or Professional Income (Form T2125). This is the first step in claiming your meals and entertainment expenses.

For corporate operations, claiming meals and entertainment expenses happens under operating expenses (8523). Then, for your T2 business income tax return’s accounting report statement, you’ll use the GIFI or General Index of Financial Information.

According to CRA, keeping records of names, business addresses, and other necessary details about customers is important.

Besides the aforementioned details, you must keep the vouchers for time and date, places, and amount spent. The records serve as proof when claiming meal and entertainment expenses and help prevent unnecessary issues. 

Documenting your expenses

Keeping records of the expenses you incur goes a long way. The following should be noted.

  • The names of the clients or customers that attended your event, their contact details, and their addresses
  • Date and time at which the expense happened.
  • Take note of the purpose of the meeting.

This information comes in handy in case the CRA makes inquiries and makes the entire process smoother.

Meals and entertainment deductions conclusion

Acquiring knowledge of the tax system and understanding what is deductible goes a long way toward helping you save money. The intricacies of the rules may seem quite complex; however, to avoid getting confused, you can hire a professional.

Tax and accounting professionals and legal professionals would help you tread the right path. Worthy to note is to also keep all the evidence (receipts) to help you claim your meal and entertainment deductions.

Thanks for checking out a guide to meals and entertainment deductions.

You might also like…

Discover Investment Opportunities

Make your money do more.

12 Results

Advertiser disclosure

Offers shown here are from third-party advertisers. We are not an agent, representative, or broker of any advertiser, and we don’t endorse or recommend any particular offer. Information is provided by the advertiser and is shown without any representation or warranty from us as to its accuracy or applicability. Each offer is subject to the advertiser’s review, approval, and terms. We receive compensation from companies whose offers are shown here, and that may impact how and where offers appear (and in what order). We don’t include all products or offers out there, but we hope what you see will give you some great options.

Young investors can trade stocks and ETFs, all for free.
Min Investment
$0
Target Return
Varied
Retire up to 30% wealthier with Questwealth Portfolio.
Min Investment
$1
Target Return
Varied
Get $20 CAD of BTC with promo code: COMPAREWISE
Min Investment
$100
Target Return
4-7%
Buy and sell gold, silver & platinum online at the best price.
Min Investment
$1
Target Return
Varied
Get up to $2,050 bonus: CASHBONUS2024
Min Investment
$0
Target Return
Varied
Flexibility with a great return.
Min Investment
$100
Target Return
5.20%
Get a $50 bonus when you sign up and deposit $250.
Min Investment
$50
Target Return
Varied
Buying and securing gold has never beeng more simple and affordable.
Min Investment
$1
Target Return
Varied
High return on a shorter term.
Min Investment
$500
Target Return
4.25%
Get a $100 welcome bonus, when you make your top-up*
Min Investment
$10
Target Return
Varied
A new passive income asset class, peer-to-peer lending.
Min Investment
$1
Target Return
Varied
Sign Up And Access 65+ Cryptocurrencies Instantly
Min Investment
$10
Target Return
Varied

FAQs about our guide to meals an entertainment deductions

Do I have to keep receipts to claim meal deductions?

You don't need to keep receipts. However, this hinges on the method of calculating the meal expense. You are not required to keep receipts when using the CRA's simplified method of calculation.

Do tips and taxes play a role in meal and entertainment deductions?

Under CRA guidelines, the total bills have tips and taxes as part of them. For example,  you had a meal that cost $20, and the tax amounted to $2.60 with a tip of $5. The total amount payable is $27.60, with $13.75 as claims.

Can groceries be claimed as meal and entertainment deductions?

Unfortunately, you cannot claim groceries as a meal and entertainment deduction. The reason behind this is that they are not used for guest entertainment. They are also not used in your place of business.

comparewise

June 4, 2023
Fact Checked
Categories:

Grow your finances today.

By submitting, you agree to comparewise’s terms of use and privacy policy.

You may also like

If you need money or are in need of some creative financing for your business, you shou...
Quarantine might have gotten the creative gears in your brain running if you’re wonderi...
Anyone who wants to succeed on a global scale must know the specifics of global transac...
What is business casual, and how do you dress for this particular style? This can be co...
If you’re running a business, you should know by then how important it is to build busi...
Car loan?
Personal Loan?

Top deals await you just a short
application away!