A deductible business expense must generally be ordinary and necessary for the business. Similar-looking purchases can receive different tax treatment, so it helps to classify meals, entertainment, and marketing separately.
Business meals
Qualifying business meals are generally limited to a 50% federal deduction. The taxpayer or an employee must be present, the cost cannot be lavish or extravagant under the circumstances, and the meal must have a legitimate business connection.
Entertainment
Entertainment expenses are generally nondeductible. Food and beverages purchased during an entertainment event may still qualify under the meal rules when their cost is purchased separately or stated separately from the entertainment charge.
Marketing and promotion
Advertising and promotion costs that are ordinary, necessary, and directly connected to the business are generally deductible. Business gifts, sponsorships, charitable contributions, branded merchandise, and personal expenses can follow different rules, even when they also promote goodwill.
State rules and the facts of a specific transaction can change the result. This article provides general information and is not individualized tax advice.