*I am not a tax professional. This is meant to be an educational tool and NOT a recommendation. Each personal situation is different and there’s a lot of grey area in self-employed deductions. If you have questions (even just little ones) … talk to a tax expert.*
BOLD STATEMENT: I feel that there isn’t a deduction more contentiously debated than the freelancer food deduction…
I keep thinking I’ve heard every single theory/justification in the book… but then another one comes out.
So I’m going to try and avoid my usual cute metaphoric brilliance (#notsohumblebrag) and try to get to the heart of this issue (if you really would rather read all the information with a big dose of classic Chris… read THIS… it’s awesome).
What does CRA say about business food deductions?
The CRA website says that you’re allowed to deduct up to 50% of food and beverage costs related to your business.
So, to recap, your choices are… 50% of what you spent OR an amount that seems reasonable in the circumstances.
Ugh… that word ‘reasonable’ again.. seemingly the cause of all the freelancer grey area tax problems…
What you need to know before claiming any food deduction:
It’s up to YOU to prove/justify that the food expense was business related. The auditor doesn’t have to prove you wrong… YOU have to prove you right.
So in the grand struggle for what is reasonable try this out…
Picture yourself sitting across from an auditor. He’s cranky. He’s tired. And he has no idea how music/art/whatever business you’re in works.
- Can you make a convincing argument for that expense?
- Do you have receipts and/or notes to back up that argument?
If you do… you may have yourself a reasonable food expense.
If you don’t… I don’t think it’s worth the risk.
It’s also important to note that auditors look at the idea of what’s ‘reasonable’ in the context of your specific industry, so what makes sense in the banking industry isn’t going to be the same for the opera world. It doesn’t have to be.
How to make your case:
If you want to be aggressive with claiming what you feel are legit food deductions… don’t just stop at keeping the receipt.
Most of the accountants that I talked to recommend jotting down a note on that receipt when you get it – just the name of the person you met with, for example.
You can also use a calendar or day planner that back up that meeting time as well.
Food expenses that seem reasonable (to me):
*these are a few food expenses that have made sense to my business (in the context of my industry), and that I’ve discussed with my accountant. They aren’t tax facts… just a place for you to start*
After show drinks with conductors/directors/orch managers
- networking is essential in the music business, but there is a difference between going to get sloshed and actually making connections
Groceries while on an away gig
- the rule my accountant goes by is that IF you are setting up a second dwelling, it’s reasonable to deduct 50% of your grocery costs
Restaurant meals on audition trips/gigs
- I don’t go to a ton of restaurants, but when I’m in a strange city for a few days it’s essential. It’s not reasonable to think that I could make my own food… so there’s an extra expense there. I’m in that particular situation because of business, therefore it’s a business expense.
There are more, but it’s tough to make any overarching rules. Back up your claims, and if you have any questions… talk to an accountant.