I had never seen her before, but she strolled in like she owned the place, with a look that dared you to tell her different.
A dame after my own heart.
I won’t pretend that I had a choice, but why she agreed to let me buy her a drink I’ll never know.
She was in town on business, an actress… and I couldn’t take my eyes off of her…
As she finished her second I knew she was about to leave, but would it be alone?
She got up, took her coat and started to walk towards the door… until… she stopped. She turned back. Was this my moment? She glided back towards me, my heart was beating fast…
Then she grabbed the receipt…
“Sorry… business trip….”
And she was gone. Written me off, just like she would write off our two drinks together.
I was alone… and confused. Not just because she had left me, but because I was pretty confident that business deductions only work for food… not alcohol… plus… was this actually a business meal?
That woman was a mystery to me, but the mystery that really needed solving was what you can actually write off when it comes to food deductions.
I’ll warn you now, the answers that I have for this question may be just as unsatisfying as my short story above (look for the sequel in bookstores near you). It’s a question I’ve been avoiding writing about because I keep thinking I’m going to come across some concrete facts that I can share with you… but as with so many freelancer tax issues… concrete facts are few and far between….but let’s start with what we know.
You are permitted to deduct up to 50 PERCENT of all food and beverage costs that are related to your business.
If you check out the CRA self-employment guide (always a good read) you’ll find a section on food… here’s what it says:
It seems so cut and dry… until you get to the word ‘reasonable’.
Reasonable is a completely subjective word. What might seem reasonable to you, might seem completely excessive to me. And who knows what seems ‘reasonable’ to the CRA.
This is where the whole thing gets kind of tough to figure out… but no one said this freelancer life was an easy one.
If you want to deduct a food cost, you need to be ready to defend its ‘reasonableness’ to the auditor if he/she comes calling. It’s impossible to know what they’ll think, but if you honestly believe that you have a good argument for the expense… then that’s the best you can do.
TALKING TO WITNESSES:
Maybe the best way to address a few of the grey areas in this whole issue are to answer a few of the specific questions that have been sent my way. Maybe they’ll line up with some of yours.
One of my colleagues interrupted me and said, “You’re not going to try to write this off are you?! Your bill is almost all alcohol. You can only write off a *MEAL*. As in… food.”
This is definitely incorrect. Phew… it feels so good to be sure of something. You are definitely allowed to write off beverages (adult or otherwise), it doesn’t have to be a ‘meal’. If you are on tour, your meals are business related, and therefore ‘reasonable’ to deduct.
This one… less definitive, but I do have an answer for you.
The rule that my accountant goes by is that IF you are setting up a second dwelling, it is REASONABLE to deduct 50% of your grocery costs. Since you are setting up that second dwelling specifically for business purposes.
So basically, if you have another home somewhere, and are staying in city far away, it seems reasonable to write off your grocery costs.
3. I’m a musician and often go out to the bar after a gig, is that a business meal?
Well… fellow musician, on the surface it kind of seems like it isn’t a business expense. BUT you know as well as I do how important going out after a gig is. It’s not just about celebrating a performance, it’s about networking with both your colleagues and the higher ups that give you work.
It seems like more people get work from the bar after a gig, than they do from doing auditions. So… I definitely think it’s REASONABLE to consider that a business meal.
4. I was out with an actor friend having lunch, we talked about lots of things, including our jobs and the industry. When we were finished he grabbed the receipt and said since we’d talked about business he was going to deduct it… was this actually a business meal?
Um… this is where you get into that tenuous territory. I think in his heart of hearts he knows that you didn’t just have a business meal… you had a meal where two friends talked about things, including business.
It’s not something that I think you could describe as reasonable. Maybe you could end up fooling an auditor, but remember if you get caught with a few flimsy deductions it can call into question all of your other deductions… creating a ton more scrutiny.
Deduct with CARE!
BUILDING YOUR CASE:
In this crazy subjective world all you can do is make sure you have a great argument and the evidence to back it up. That means receipts (unless you’re using the simplified method when traveling… which you can read more about here), but more than that it means some kind of documentation to help prove that you were doing business. My accountant recommends keeping a printed copy of your calendar, or a gig schedule so that you can match your business meal deductions to business events.
I know that may seem like a lot of work. And …. It is.
It’s insane how subjective something like this seems to be. But this is the world, and this is the cost of doing business in it (or at least deducting in it).
The Butler did it…
Most mysteries have nice conclusive endings, but this one is in a bit more of a Serial brand of mystery. At the end, you’re left with more questions than answers.
What do you still wonder about food deductions? What have you heard that seems crazy, or maybe… pretty reasonable? What have you been deducting for years and now are a bit unsure of?