M&IE: Travel Expense or Meals 50%?

[AdamM1]

I traveled for 180 days for work in 2021.  I will be claiming fuel costs, tolls, accommodation, and so on at the actual expense of each item.  Rather than itemizing food, however, I hoped to use the M&IE per diem for each county I was in and the days I was there.

When reporting, am I correct to assume the entire amount needs to go in the Meals 50% category?  I have seen in some places people being told to file it as a travel expense as well.  Can I claim any amount as Meals 100% or is this ability voided when I choose to use the per diem?

Is my proposed plan of action acceptable as indicated above?

[Opus 17]

What you are allowed to deduct is 50% of your actual meal expense or 50% of the M&IE rate.

Since the deduction limit for local business meals (entertaining clients and so on) is also 50%, it doesn't actually matter to your final tax where you report it.  I assume that in the travel expense section, Turbotax asks separately about transportation, lodging, food and other incidentals, so I would enter it there. 

I believe that Turbotax wants you to enter the entire expense and Turbotax will perform the 50% calculation.  However, another expert should confirm this for me, or you can check yourself by verifying your schedule C before you file.  (I don't have the actual program handy on my current computer.)

[AdamM1]

When I input the M&IE into the Meals 50% section, it reduces my expected refund compared to when input into Travel Expenses, so I assume it is very relevant where I file it?

I am also a little confused as I could have taken some or even most of my meals in restaurants, which would be filed in the Meals 100% section.  When I input my M&IE there, I get the same refund as when they were input to Travel Expenses.

Long story short, I definitely would financially prefer to file as Meals 100 or Travel Expenses according to the TurboTax software, but I don't know if this creates an audit risk or is illegal.

[Cynthiad66]

@AdamM1

When you choose per diem, you are allowed to claim the entire per diem amount, 100%.  Use this link for more info:  Meal Portion of Per Diem Allowance

Prior to 2021, the IRS allowed an 80% deduction, however, temporarily for 2021 and 2022, the Federal Consolidated Appropriations Act of 2021 (FCAA), passed on December 27th, 2020, allows a 100% deduction on Per Diem.

When you are self-employed, you generally can deduct the ordinary and necessary expenses of traveling away from home for business from your income. But before you start listing travel deductions, make sure you understand what the Internal Revenue Service (IRS) means by "home," "business," and "ordinary and necessary expenses."

The IRS allows business travelers to deduct business-related meals and hotel costs, as long as they are reasonable considering the circumstances—not lavish or extravagant.

You would have to eat if you were home, so this might explain why the IRS limits meal deductions to 50% of either the:

• Actual cost of the meal
• Standard meal allowance

This allowance is based on the federal meals and incidental expense per diem rate that depends on where and when you travel.

Generally, you can deduct 50% of the cost of meals. Alternatively, if you do not incur any meal expenses nor claim the standard meal allowance, you can deduct the amount of $5 per day for incidental expenses. You can also deduct incidental expenses, such as:

• Fees and tips given to hotel staff
• Fees for porters and baggage carriers

But don't forget to keep track of the actual costs.

Tax Deductions for Business Travelers

[AdamM1]

I have already read all of this -- my issue is in translating what is being said into actionable items.

I understand I can claim the entire per diem amount, but I am still unclear as to WHERE I claim it.  Example:
I am going to claim $10,000 is M&IE for 2021.

If I file this under Travel Expenses or Meals 100% in Turbotax, my refund is adjusted by MORE than if I file this under Meals 50%.

The only thing I am unclear about is which category I am allowed to claim the $10k for M&IE as this has a monetary impact on my return.

[Opus 17]

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@AdamM1 wrote:

When I input the M&IE into the Meals 50% section, it reduces my expected refund compared to when input into Travel Expenses, so I assume it is very relevant where I file it?

I am also a little confused as I could have taken some or even most of my meals in restaurants, which would be filed in the Meals 100% section.  When I input my M&IE there, I get the same refund as when they were input to Travel Expenses.

Long story short, I definitely would financially prefer to file as Meals 100 or Travel Expenses according to the TurboTax software, but I don't know if this creates an audit risk or is illegal.

---

This is a law change I just learned about.

The IRS has not released the 2021 version of publication 463 yet, probably for this reason.  The instructions for Schedule C say this:

Enter your deductible business meal expenses. This includes expenses for meals while traveling away from home for business. Your deductible business meal expenses are a percentage of your actual business meal expenses or standard meal allowance. See Amount of deduction, later, for the percentage that applies to your actual meal expenses or standard meal allowance. In most cases, the percentage is 50%. However, business meals are 100% deductible if the meals are food or beverages provided by a restaurant and paid or incurred after December 31, 2020, and before January 1, 2023.

If turbotax is giving you a different deduction based on where you enter it in the program, the I assume the programmers took an inappropriate short cut and applied the new 100% limit to travel but not local meals (if they are entered separately) instead of adding a new question about restaurants.  I can try and examine some of the internal worksheets at home tonight, if I remember.

In the mean time, if these were travel meals eaten at restaurants, you can enter them in whichever program location gives your the 100% deduction.  

If audited, anyone can be asked to prove their deductions.  In this case, you could be asked to prove you ate at restaurants.  I can't tell you how likely this is, and I can't tell you if "well, my hotel room didn't have a kitchen so where else would I have eaten" will be an effective answer if you didn't keep proof.  It's a new change so no one has been audited and the change probably hasn't even been written into the IRS audit manuals yet. 

[MinhT1]

You should claim the per diem allowance under Travel Expenses or Meals 100%.

[AmeliesUncle]

Meal Per Diem deductions for 2021 and 2022 should be entered in the 100% category.

From IRS Notice 2021-63:

may treat the meal portion of a per diem rate or allowance paid or incurred after December 31, 2020, and before January 1, 2023, as being attributable to food or beverages provided by a restaurant.

https://www.irs.gov/newsroom/irs-provides-guidance-on-per-diem-rates-and-the-temporary-100-percent-d...

[gerardo47]

Hello

I have a question re: self employment taxes you may have responded to earlier. I need clarification if you will allow.

I am self employed for part of the year where I travel away from home to another state and only do that job.

A company pays for my lodging and car. I pay for my meals. That lodging is my home for six months. Can I take the per diem rate for meals? I get a 1099 from the company since they pay me for my work.

I live in another state where when I return I do my other self employment business in my home. This is separate from the company mentioned above. I know I cannot deduct meals here.

Am I eligible for the per diem rate for meals when I am away from home. I am not sure if that is allowed or if the IRS will consider the apartment the company got me for the 6 months I was away from home getting a 1099 my permanent home.

Where do I put that in turbotax?

Thank you

[AmeliesUncle]

If you are temporarily away (less than 1 year) from your "Tax Home", yes, your meals would be a deduction.

Based on your description it sounds like you would qualify, but you should look up the definition of "Tax Home" in IRS Publication 463:

https://www.irs.gov/publications/p463#en_US_2021_publink100033754

[Opus 17]

@gerardo47 

in general, if you are working away from your tax home on a temporary assignment expecting to last and actually lasting less than one year, you can deduct your actual lodging expenses and 50% of your actual meal expenses or 50% of the federal per diem. Your employer has the option of paying those expenses for you on a tax free basis, if they have an accountable expense plan and if the travel expenses are work related.  If you are reimbursed for your travel, lodging, or food expenses on a tax-free basis, you may not also take a tax deduction for them. However, if you are not reimbursed, or if the reimbursement is included in your 1099 gross compensation, then you can deduct the expenses.

As mentioned, I would review the concept of” tax home” to make sure that you have enough of a business and financial connection to your place of residence that it can be considered your tax home.