TAX DEDUCTION FOR ENTERTAINING YOURSELF?
When you have breakfast with a group of your MLM ‘downline,’ and each of you pays for his/her own meal, is there any tax deduction possible?
How about if you go to lunch with three or four colleagues from your W-2 job, and present your home-based business opportunity in an attempt to recruit one or more of them. But then each of you pick up your own tab. Is there any tax deduction possible?
You’re planning a business opportunity presentation at a hotel meeting room, so you join your fellow presenters for dinner before the meeting. Is there any tax deduction possible?
The answer is “Yes,” under the IRS’s “Dutch Treat Rule.”
The amount you can deduct is one-half of the difference between what you paid for the meal and what it would have cost you to eat at home. For example, if you paid $10.00 for a breakfast, and eating breakfast at home would have cost you $1.50, you can deduct one-half of $8.50, or $4.25.
Doesn’t sound like much? What if you did that three times a day for 20 weeks a year? You’d have $1,275 in “Meals & Entertainment” tax deductions. $1,275 for a person in the 35% tax bracket, is the same as putting an extra $450 cash in your pocket.
How do you know what it would have cost to eat at home? You plan one week’s worth of meals, go to the grocery store, and buy just those items. (Hint: This would be a better week for hot dogs on day-old buns, rather than fillet mignon with capers, scallions and fully-loaded baked potato.) Now divide (or pro-rate) the food into the three meals, and then divide each by 7 (number of days in a week).
Now you have the average cost of each of the three meals, if eaten at home.
Let’s say your computations show that eating breakfast at home costs an average of $1.50, lunch costs $2.75 and dinner costs $3.85. Put your menu, the grocery store receipt, and your calculations in your tax file, because this is your “basis” for the calculations for your Dutch Treat deductions for the entire year.
By the way, you still have to document your expenses as described in Chapter IX of “It’s How Much You KEEP, That Counts! Not how much you Make.” Also, remember that documentation must be completed during the same 24-hour-day the expenses were incurred.
That’s a “Tax Tip You Can Bank On.”
Ronald R. Mueller, MBA
NOTE: If you do not have a copy of Ron Mueller's ultimate tax-reduction system, called “It’s How Much You KEEP, That Counts! Not how much you Make,” you can still get it for as little as $32.