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Is a Business Lunch with a Friend Deductible?

Well. Technically, it is. Let’s say you have a friend with whom you also do business. You go out to lunch, and while munching your tacos you happen to talk about the project the two of you are working on, for which your friend/client is paying you — or, more specifically, your S-corporation. 😉 Let’s take this a little further and posit that you actually come to a decision, over lunch, about some tiny element in the project. In theory, that conversation magically turns a social event into a business lunch, and so in principle the cost of the lunch could be tax-deductible or chargeable to your business’s credit card.

How do you feel about that?

Saturday evening Wonder-Accountant and I went off to a choral concert (we both sing on choirs), and beforehand went to dinner. On Friday, I had engineered the planned bank-account consolidation maneuver, reducing the number of accounts and their associated complicated transactions from four to two, only one of which will ever see much activity. As a bonus, I arranged for Fidelity to deposit the funds for my share of the mortgage on a house my son and I co-own directly to our joint account, rather than bouncing the money first into my checking account and then into the joint account (my son pays the mortgage bill from that account and also uses it to accrue savings for maintenance & repairs).

As you might imagine, W-A was most pleased, since this strategy acts as aspirin to a headache, where she’s concerned. So we toasted our mutual genius over dinner and spent some time discussing it.

Presto-changeo! A business meal, right?

Possibly. But personally, I don’t feel comfortable with it, as a general practice, and so paid for my dinner out of personal cash. Ex-DH, who was a corporate lawyer, always said that any time you talk business over a meal out, even briefly, the tab becomes a business expense. W-A says that if you’re talking business over a restaurant meal, you can pay for the client’s (or vendor’s) meal with corporate money but you should pay for your own with personal funds. If that’s the case, I could have paid for hers and she could have paid for mine and thereby charged the entire meal to our respective businesses.

To my mind, the technicalities of it are beside the point. It seems to me what matters is the primary reason for the meal. If you’ve arranged with a client or vendor to meet over breakfast, lunch, or dinner for the specific purpose of discussing business, then what you have, obviously, is a business meeting. In that case, all the costs associated with it, including the tab and the mileage, should be tax-related.

However, if the people involved are friends who also do business together but they’re out on the town to have a good time, then it seems to me that the meal is a social occasion — even if business matters come up in conversation — and deducting it is fundamentally unethical.

The only person who knows that would be you. The IRS can’t know or confirm whether you organized dinner out specifically to talk business.

So…how would you regard the deductability of a meeting with a vendor or client in the privacy of a public place?

4 thoughts on “Is a Business Lunch with a Friend Deductible?”

  1. Hmmmm….If I were meeting with my accountant I would swing by McDonalds….grab a couple McDoubles from the $1 menu …swing by her office aaaand PRESTO… instant “business lunch”. Deductable and effecient…Just my 2 cents…

  2. My accountant is allergic to things that contain gluten, and as part of my diet I’m not eating a) breads or other heavily starchy products; b) oversalted foods and foodoids, and c) food-like substances. That pretty much lets out McDonalds. 😀

    • Wait’ll you see my book! Watch this space…eventually the thing will be ready to go. Most of what Americans eat is not food; that’s why we’re all getting fat.

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