If you own a business in Ontario, Canada, you may be able to claim meals and entertainment expenses on your taxes. But, do you know what qualifies as a legitimate business expense and what doesn’t? In this blog post, we’ll cover everything you need to know about claiming meals and entertainment expenses, and how to do it correctly.
What are meals and entertainment expenses?
Meals and entertainment expenses are business expenses that are incurred for the purpose of entertaining clients, customers, or employees. These expenses include things like taking clients out for a business lunch or dinner, buying food for an employee meeting, or hosting a company event. These expenses can add up quickly, but they can also be a legitimate tax deduction if they meet certain criteria.
What expenses can be claimed?
To claim meals and entertainment expenses, they must be reasonable and necessary. This means that the expense must be directly related to your business and must be incurred in the course of earning income. In addition, the expense must not be excessive or lavish, and it must be incurred with the purpose of earning income. Some common examples of meals and entertainment expenses that can be claimed include:
- Business meals with clients or customers
- Business meals with employees
- Catering for a company event
- Tickets to a sporting event or concert for clients or customers
- Company parties or team building events
- Business travel expenses that include meals and entertainment
How to claim meals and entertainment expenses
To claim meals and entertainment expenses on your taxes, you need to keep accurate records of all expenses. This includes receipts, invoices, and other documentation that shows the expense was incurred for a legitimate business purpose. In addition, you need to document the date, location, and purpose of the expense, as well as the names of any individuals who attended the event or meal.
It’s also important to note that only 50% of meals and entertainment expenses can be claimed as a tax deduction. This means that if you spend $100 on a business meal with a client, you can only claim $50 as a tax deduction.
Conclusion
Claiming meals and entertainment expenses can be a legitimate way to reduce your tax liability as a business owner in Ontario. However, it’s important to make sure that you are following the guidelines and keeping accurate records of all expenses. By doing so, you can maximize your tax savings while avoiding any potential issues with the Canada Revenue Agency (CRA). If you have any questions about claiming meals and entertainment expenses, it’s always a good idea to consult with a tax professional who can provide guidance based on your specific situation.