Taxes

What Therapists Need to Know About Deducting Business Meals

Headshot of Bryce Warnes
March 10, 2024
April 25, 2023
Bryce Warnes
Content Writer
Woman eating at a restaurant and talking on her cell phone

Many self-employed therapists could reduce their tax bill by deducting business meal expenses, but they don’t.

For those new—and not-so-new—to self employment, the prospect of running afoul of the IRS is just too intimidating. As a result, they’re wary of claiming deductions like the business meals expense.

Here’s what you need to know so you can start to take advantage of the business meals deduction on your next tax return, while avoiding trouble with tax authorities. 

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What is a deductible business expense for therapists?

If you’re already familiar with deductible business expenses for therapists, you can skip ahead to the next section on the business meal expense. Otherwise, keep reading for a quick rundown on what deductible expenses are and how they’re typically listed on tax returns.

Ordinary and necessary business expenses

According to the IRS, deductible business expenses are expenses that are both “ordinary and necessary” in the course of conducting a trade or business. 

These expenses are typically deductible in the year they are incurred and can include items such as rent, wages, and supplies. In the words of the IRS:

To be deductible, a business expense must be both ordinary and necessary. An ordinary expense is one that is common and accepted in your trade or business. A necessary expense is one that is helpful and appropriate for your trade or business. An expense does not have to be indispensable to be considered necessary.

Deductible business expenses can reduce a business's taxable income, which lowers the amount of taxes owed.

Deductible expenses vs. itemized expenses vs. the standard deduction

A lot of new business owners get mixed up when it comes to personal deductions and business deductions. It’s a common misconception that if you claim the standard deduction on your tax return, you can’t claim business expenses.

Whether you take the standard deduction or you choose to itemize your expenses, it’s reported on Schedule A of Form 1040.

Deductible business expenses, on the other hand, are reported on Schedule C of Form 1040. There is absolutely nothing stopping you from both taking the standard deduction and deducting business expenses. You can learn more from our article on tax deductions for therapists.

What is the business meals deduction for therapists?

The Tax Cuts and Jobs Act (TCJA) of 2017 muddied the waters by eliminating the business entertainment deduction. Many small business owners mistakenly took this to mean business meal deductions no longer qualified. That’s false.

So long as you’re buying a meal for business purposes, it qualifies as a tax deduction. This does not apply to pre-packaged food that you could potentially save to eat later, though.

Here are some examples specific to therapists.

Coffee or meals with business partners or co-workers

So long as you’re meeting to discuss business matters, the meal qualifies as tax deductible.

Meals for employees and contractors

If you’re hosting a lunchtime seminar for people who work for you, the cost of the meal qualifies as a tax deduction. The same goes for staff parties or other events where you supply the food.

Lunch meetings with potential clients

You’re probably not going to meet a potential one-on-one therapy client for Wing Night at a local sports bar. But if you’re meeting leads—for instance, reps from local organizations considering hiring you to present in-house workshops—the cost of the meal is tax deductible.

While traveling

If you are traveling to a destination away from work for business purposes, meals you purchase en route are tax deductible. Other meals you purchase during the trip are not. You can learn more from our complete guide to business travel deductions for therapists.

Networking

If you purchase food at an event where you could reasonably expect to meet with others in the industry, potentially growing your client list or list of business contacts, you may be able to deduct the cost. In fact, dining in at a restaurant may qualify as “networking.” Check with your accountant before claiming this deduction, however—there are a lot of variables at play.


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How much is the business meals deduction for therapists?

The amount of the business meals deduction has gone through some changes. For some tax years, business meal expenses are 100% deductible. For others, they’re only 50% deductible.

For 2020 and prior tax years, business meals are 50% deductible. For 2021 and 2022, they’re 100% deductible.

The increased amount was introduced by the IRS to help offset the rising costs of meals due to inflation. Here’s a more detailed explanation from an accountant.

Where do you list business meals deductions on your tax return?

So long as your therapy practice is a pass-through entity—a sole proprietorship, general partnership, S corporation, or an LLC electing any of those statuses—you report business meal expenses on Schedule C of Form 1040.

Keeping receipts and other records for business meals

It’s essential you keep official proof of purchase for any business meals you deduct on your tax return. If the IRS discovers you’ve deducted business expenses on your tax return but you don’t have proof to back those claims up, you could be penalized. 

Some best practices:

  • Use an expense tracking app. With an app, you can scan or photograph your receipts and keep them on file, safe from damage, indefinitely.
  • Make notes for each business meal you deduct. Note the nature of the meeting or event, what was being discussed insofar as it relates to business, and who you met with.
  • Keep your receipts for at least six years. The statute of limitations on tax returns is six years. If the IRS believes you’ve committed fraud, they can audit you as far back as six years into the past. 

What happens if your business meal deduction is invalid?

If you file a tax deduction but the IRS determines you do not qualify for it, you’ll be penalized.

The penalty amount is 20% of the difference between the amount you actually paid in taxes with an invalid business deduction and the amount you should have paid, plus the full difference itself. That’s 120% total.

Using Form 8275 for protection

Form 8275 is a disclosure statement. You have the option of filing it with your tax return if you believe any of the expenses you’re deducting may be questioned by the IRS.

 The purpose of the form is to provide added information backing up your claim. Even if the IRS determines a tax deduction you claimed was not valid, the fact that you filed Form 8275 protects you from paying the penalty—the extra 20% of the difference between what you should have paid and what you did.

More accountants are beginning to recommend clients file Form 8275. The form may be particularly appropriate if you’re claiming a new or unusual deduction. 

One example: you’ve never claimed business meal expenses before, but this year you paid for catering for a staff holiday party, so you’re claiming $500. In that case, an accountant may recommend you include Form 8275 when you file your taxes.

It’s especially important to consult with an accountant before filing Form 8275, so you can be sure to avoid any major mistakes.

Looking for more ways to lower your tax bill? Check out our complete list of tax deductions for therapists.

This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult their own attorney, business advisor, or tax advisor with respect to matters referenced in this post.

Bryce Warnes is a West Coast writer specializing in small business finances.

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Run your therapy practice with confidence

Run your therapy practice with confidence

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