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New Member

Can I deduct coffee costs in coffee shops for networking purposes, even if I pay for my own coffee only?

I have a one-person LLC. There is no office space, part of the work is done from home office, most is done at the client's home.

As the business is in starting phase I have many networking meetings with partners and potential referral partners. Most of them are meetings in local coffee shops and each of the parties pays for its own coffee. Can I deduct my coffee costs for such meetings? What documentation do I need for it?

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New Member

Can I deduct coffee costs in coffee shops for networking purposes, even if I pay for my own coffee only?

If you are out of town (see below) you can deduct just your meal or drinks.  If you are not traveling, you could deduct yours for entertainment IF you purchase the client's drink as well.  You need to keep receipts that show you are traveling or that you bought 2 drinks.

Meals While Traveling

If you’re traveling for business, your travel expenses are partially deductible. While you can deduct 100 percent of your lodging and mileage expenses, you can only deduct 50 percent of the meals you purchase. You may include the entire cost of the bill when you calculate the expense, including food, beverages, sales tax, and gratuity.

Business owners can only take this deduction if they are truly out of town. In the eyes of the IRS, that means you’re outside or general area where your work is located. To qualify as a business trip, the period of time must be substantially longer than a day’s work and you need to rest or sleep while away. So unless it’s exceptionally long, a day trip doesn’t qualify.

Before you deduct the expense, make sure that there’s a legitimate business activity connected to the trip. Traveling for a conference, seminar, trade show, continuing education, or to visit a customer or potential client are all valid business activities.

Meals as a Form of Entertainment

As long as there’s a business connection, meals can be considered a deductible form of entertainment. You need another person to make this one work — there’s no deduction allowed if it’s just you. However, you may write off the cost of your meal when you’re purchasing it along with a meal for a current customer, potential client, or employee. To write it off, there must be some substantial business discussion before, during, or directly after the meal. If you expect to get some income or business benefit from providing the meal, it also qualifies as a deduction. As with travel-related meals, you can only deduct 50 percent of meals as entertainment expense.

100 Percent Deductible Meals

If you have employees, some of your meal expenses are 100 percent deductible. For example, the IRS allows businesses to fully deduct occasional small snacks and meals that are purchased for the benefit of employees. Doughnuts and coffee purchased for an office meeting are a perfect example. Lunches and dinners brought in to facilitate working through lunch or working late also count. The cost of food and drink involved in hosting a companywide event – like an annual picnic or a summer outing – are also deductible.

Final Word

Tax guidelines and requirements for meal deductions are surprisingly complex. Luckily, there are helpful resources available to help you sort through it. IRS Publication 463 has all the information you need but can be time-consuming to navigate. Check out our other article on how to maximize your meals and entertainment tax deductions if you want to learn more.

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