Meal Expenses on a Schedule E

[QualityManagement-1]

I am a Landlord and I have multiple properties and employees.  I believe I can write off 50% of a meal when I take my employees out for lunch while we are working and still talking about the job of one of my rental properties.   BUT where do I put that expense on my Schedule E?    Under "other" and label it "50% meal"??

[DoninGA]

Since you have multiple properties and employee you should be reporting your income and expenses as a business on Schedule C.  You can then enter the meal expense for the employees. 

But you cannot enter that expense on a Schedule E.

[Carl]

If you're reporting your rental income/expenses on SCH E, then you can't have W-2 employees, as there's nowhere to report what you pay employees on SCH E. At best, they would be contractors to whom you would issue (if required) a 1099-NEC. Therefore, there would be no employees, and there's no deductions for "any" meals anywhere on the SCH E.
If you have employees that work for and get paid by  you on a regular basis, then it "sounds" to me like you're running a hotel/motel/AirB&B/VRBO type of operation where houses or units are rented for short periods of time. That would be a SCH C business; not SCH E.

[QualityManagement-1]

Thank you for your reply!  I understand the tax benefit is greater for me when I use a schedule E.  I also note my employee wages when it's asked while completing Schedule E in Turbo Tax.   I would prefer to forfeit my ability to do meal write offs if I had to switch to a Schedule C.   Is it okay for me to continue to use Schedule E with employees and just not take the meal expense benefit? 

[QualityManagement-1]

Thanks for your reply.  When entering my Schedule E Turbo Tax asks "Let's cover some uncommon situations" And it has an option to enter "This Business has wages." and it allows me to enter the W-2 wages $$$ paid for the property.    When I click "learn more" this pops up: 

"Qualified wages
There is a specific definition of wages that must be used when calculating this deduction. The full details are explained in IRS Notice 2018-64, but here is a brief summary.

All wages must be reported on a Form W-2 that has been properly filed with the IRS. Statutory wages (reported on Form W-2 with "statutory employee" checked in box 13) are not counted as wage for purpose of this deduction."

So I am just learning... and I think I can have employees for my rental properties?   FYI... my employees are my 16 year old kids so I don't have to pay all the fees that typically go with having employees since they are under 18 and they are my kids.   I already did W2's for them.

[Carl]

Is it okay for me to continue to use Schedule E with employees and just not take the meal expense benefit?

You have a "mixed bag" here, and based on the information I don't know, it's hard to make a call on this. Just exactly what do you have here? 15-20 Properties? Maybe more? Do you own them all? Or are you just managing them for other owners? Is the rental business your primary source of income for the year?  Are they long term rentals of like, one year or more? Or short term rentals where you have occupants for periods of time less than 30 days most of the time?
I'm trying to understand why a landlord needs full time (or even part time) employees on a regular basis. Either you have a lot of properties, a high occupancy turnover rate, or dilapidated properties that require constant, never-ending maintenance to keep things up to snuff. I doubt the last one, as you wouldn't be employing minors for that.

[QualityManagement-1]

Carl, 

Thanks for digging in here.

I have 17 properties 

I own all 17 properties

NOT my primary source of income

I have long term rentals  

I have 2 part time employees (my kids) that do the following:

1) weekly CAM cleaning on multiple properties (multi-units)

2) Weekly updates in Quicken

3) Email late renters

4) Reconcile rent payments

5) Other Administration small jobs 

I have split all the work between all of us and none of us work that many hours per week.

So I think Schedule E is fine???

[Anonymous_]

---

@QualityManagement-1 wrote:

So I think Schedule E is fine???

---

Generally, rental real estate activity is reported on Schedule E even if it is also a trade or business activity; however, if you provided significant services to the renter, such as maid service, report the rental activity on Schedule C, not on Schedule E. Significant services do not include the furnishing of heat and light, cleaning of public areas, trash collection, or similar services.

If you were a real estate dealer, include only the rent received from real estate (including personal property leased with this real estate) you held for the primary purpose of renting to produce income. Do not use Schedule E to report income and expenses from rentals of real estate you held for sale to customers in the ordinary course of your business as a real estate dealer. Instead, use Schedule C for those rentals.

See https://www.irs.gov/instructions/i1040se#en_US_2023_publink24332td0e1083

[Carl]

None of what you mentioned is "directly beneficial to the tenant" and is not enough to qualify as a SCH C business unfortunately. But I still don't know for sure if rental income is your primary source, or "a major part of" your income for the year. Being that you mention "part time" on the rental properties, I would suspect you have other employment and the rental stuff is just supplemental.

[Anonymous_]

---

@Carl wrote:

...But I still don't know for sure if rental income is your primary source, or "a major part of" your income for the year.

---

@QualityManagement-1 already stated, "NOT my primary source of income" which, by the way, is not a determining factor of whether reporting should be on Schedule E or C. 

[QualityManagement-1]

This is all great info, thank you for this.  In 2023 rentals were not my main source of income.   Here are my take aways from the conversation.

- I prefer to keep doing a Schedule E, and I am good with NOT doing meal expenses at all.

- I have 2 employees (my kids) they clean CAM areas (Comon area's in my budlings), yard work, other admin.  It's still my understanding I can continue to do Schedule E.

Note, I do not do any services where my renters pay me.  In 2024, my primary source of income may be my wife.  If I keep things the same, can I continue to use Schedule E for 2024 tax year?

[Anonymous_]

---

@QualityManagement-1 wrote:

If I keep things the same, can I continue to use Schedule E for 2024 tax year?

---

Yes

[QualityManagement-1]

THANKS!

One last thing, this website:  10 Common Landlord Tax Deductions [2024 Update] - Stessa

#9 claims I can deduct meal expenses (50% of course) on a schedule E as a Landlord.   This contradicts what we talked about here.  Any thoughts on this?   Could meal expenses on Schedule E be new for 2024 BUT not for 2023?

[Anonymous_]

---

@QualityManagement-1 wrote:

Could meal expenses on Schedule E be new for 2024 BUT not for 2023?

---

No.

See https://www.irs.gov/instructions/i1040se#en_US_2023_publink24332td0e1237

Just an FYI, it is extremely rare for residential rental real estate to be reported on Schedule C.

[QualityManagement-1]

Thank you for this IRS link for Schedule E.

It reads: 

"Line 6 You can deduct ordinary and necessary auto and travel expenses related to your rental activities, including 50% of meal expenses incurred while traveling away from home."

"What's New Business meals expense. The temporary 100% deduction for food or beverages provided by a restaurant has expired. The business meal deduction reverts back to the previous 50% allowable deduction beginning January 1, 2023. See Line 6 , later, for more information."

My original question was "I take my employees out for lunch while working"  I am NOT referring to office work.  I am talking about working on site at the property.   Doing Maintenace work or cleaning.    Yesterday we trimmed some trees and bushes 20 miles away (at a rental).  We stopped to get food while we are out.  So does this meal go under schedule E travel at 50% of the cost?