Business Travel Meal Allowance: Navigating IRS Rules & Average Rates

Business travel is a common necessity across many professions, including those within the entertainment industry, whether for performers on tour, technical crews on location, or executives attending conferences. Understanding how to properly deduct the associated expenses, particularly for meals, is crucial for managing your finances. While there isn’t a single “average” meal allowance in the sense of a calculated mean across all business travelers, the IRS provides a simplified method using standard rates, known as the Standard Meal Allowance. This article, based on IRS Publication 463 (2024), delves into the rules surrounding meal deductions for business travel, explaining the standard meal allowance and other key considerations.

When you travel away from your tax home for business, you can typically deduct the ordinary and necessary expenses you incur. This includes the cost of transportation, lodging, and meals. An ordinary expense is common and accepted in your business, while a necessary expense is helpful and appropriate. These expenses must require you to be away from the general area of your tax home substantially longer than an ordinary workday, necessitating sleep or rest. Understanding these foundational rules is the first step in claiming business travel deductions. You can explore travel options like flare airline for your business trips. For drivers on the road, understanding travel stop facilities is key, such as those provided by a flying j dealer — mega travel plaza breezewood photos.

Flowchart and definitions illustrating when local transportation expenses are deductible

The Standard Meal Allowance Explained

Instead of tracking the actual cost of every meal while you’re traveling for business, the IRS allows you to use the Standard Meal Allowance. This is a set daily amount for your meals and incidental expenses (M&IE). Using this method simplifies recordkeeping for the amount spent on meals, although you must still maintain records to prove the time, place, and business purpose of your travel.

Incidental expenses covered by the standard meal allowance include fees and tips given to porters, baggage carriers, hotel staff, and staff on ships. It’s important to note what’s not included: laundry, cleaning, lodging taxes, phone calls, transportation to/from meals, or costs of filing travel vouchers.

For those who don’t have any meal expenses but still incur incidental expenses while traveling away from home, there’s an optional method to deduct incidental expenses only. This allowance is $5 a day and is not subject to the 50% deduction limit that applies to meals. You cannot use this method on the same day you claim the standard meal allowance.

What is the Average Meal Allowance (Standard Rate)?

The “average meal allowance” you might be searching for corresponds to the federal M&IE rate used for the standard meal allowance method. This rate varies depending on the location and the federal government’s fiscal year.

For travel through September 30, 2024, the standard rate for most small localities in the United States was $59 per day. Effective October 1, 2024, this rate increased to $68 per day.

Many major cities and other specific localities are designated as high-cost areas and qualify for higher standard meal allowances. For instance, the high-low simplified method uses a higher rate for designated high-cost areas ($309 per diem including $74 for M&IE through Sept 30, 2024; $319 per diem including $86 for M&IE effective Oct 1, 2024) and a lower rate for all other areas ($214 per diem including $64 for M&IE through Sept 30, 2024; $225 per diem including $74 for M&IE effective Oct 1, 2024).

You can find the specific federal per diem rates, including the M&IE breakdown for different localities, on the U.S. General Services Administration (GSA) website at GSA.gov/travel/plan-book/per-diem-rates. If you travel to multiple locations in one day, you use the rate for the area where you stop for sleep or rest.

A special rate applies to transportation workers (those who move people or goods and regularly travel to areas with different rates). For these individuals, the standard meal allowance is $69 per day (or $74 outside the continental U.S.) through September 30, 2024, increasing to $80 per day (or $86 outside the continental U.S.) effective October 1, 2024. Using this special rate means you must use it for all trips taken that year. Comparing flight options, such as those offered by emirates flights, might involve considering these per diem rates depending on your role.

Prorating the Allowance

For partial travel days (the day you depart and the day you return), you must prorate the standard meal allowance. The most common method is to claim 3/4 of the full daily rate for each partial day. Alternatively, you can use any consistent method that aligns with reasonable business practice.

The 50% Limit on Meal Expenses

Generally, you can only deduct 50% of your business-related meal expenses. This limit applies whether you use the actual cost method or the standard meal allowance. It applies to unreimbursed meal expenses while traveling away from home and other business meals. However, certain individuals, like those subject to Department of Transportation’s “hours of service” limits (e.g., interstate truckers, airline pilots), can deduct 80% of their business meals while traveling away from home.

Flowchart illustrating whether the 50 percent deduction limit applies to business meal and entertainment expenses

The 50% limit applies after determining the amount that would otherwise be deductible. For example, if a meal is deemed lavish or extravagant, the lavish portion is disallowed first, and the 50% limit applies only to the remaining reasonable amount.

There are exceptions where the 50% limit does not apply, such as:

• Expenses treated as compensation to an employee.
• Expenses reimbursed under an accountable plan (for the employee, the employer is subject to the limit).
• Self-employed individuals adequately accounting for and being reimbursed by a client (the client is subject to the limit).
• Recreational expenses for employees (like a company picnic).
• Meals provided to the general public as advertising.
• Costs of meals actually sold to customers (e.g., a restaurant’s food costs).

Comparing ticket prices, such as looking up qatar airways ticket price, is a separate travel cost not subject to the meal limits.

Recordkeeping for Meal Expenses

To support your meal expense deductions, whether using the standard allowance or actual costs, you must keep adequate records. While the standard meal allowance simplifies proving the amount, you still need to substantiate other elements of the expense.

For meals, your records should generally show:

• Amount: The cost (or the daily standard allowance rate).
• Time: Date of the expense.
• Place: Name and location of the restaurant or city of travel.
• Business Purpose: Why the meal was necessary for your business.
• Business Relationship: For business meals with others (if applicable), the names and business relationship of the people entertained.

Documentary evidence, such as receipts, is generally required for expenses of $75 or more. For meals while traveling away from home reimbursed under an accountable plan using a per diem allowance, receipts are generally not needed for the amount covered by the allowance. Records should be kept at or near the time of the expense.

Reporting Meal Expenses and Allowances

How you report your business travel meal expenses depends on whether you are an employee or self-employed, and if you received reimbursements under an accountable or nonaccountable plan.

• Self-Employed: Report deductible business expenses, including meals (subject to the 50% limit), on Schedule C (Form 1040) or Schedule F (Form 1040).
• Employees (Eligible): Certain employees (like Armed Forces reservists, qualified performing artists, fee-basis government officials, and those with impairment-related work expenses) use Form 2106 to figure their employee business expenses.
  • Accountable Plan: If your employer reimburses you under an accountable plan and the reimbursement is equal to or less than the federal rate, the reimbursement isn’t included in your Form W-2 income, and you generally don’t need to report it or the expenses on your return. If your expenses exceed the reimbursement, you may be able to deduct the excess by completing Form 2106 and itemizing deductions.
  • Nonaccountable Plan: If your employer reimburses you under a nonaccountable plan, the reimbursement is included in box 1 of your Form W-2 wages. You must complete Form 2106 and itemize deductions to deduct your business expenses, including meals (subject to the 50% limit).

Understanding these reporting requirements, especially regarding how reimbursements affect what you need to report, is a critical part of claiming your business travel meal deductions correctly.

Conclusion

While there isn’t a single “average meal allowance” for business travel defined by the IRS, the Standard Meal Allowance provides set daily rates (which vary by location and year) that simplify deducting meal and incidental expenses incurred while traveling away from home for business. By understanding these standard rates, the 50% deduction limit, and the necessary recordkeeping and reporting rules outlined by the IRS, you can accurately claim your business travel meal expenses and ensure compliance with tax regulations. Accurate documentation remains key, whether you choose the standard allowance or track actual costs.