CFF: Is Your Cup of Coffee Tax Deductible?

Looking for that last-minute deduction? Are you self-employed? Well, those caramel macchiatos you and your client enjoyed when you met at the coffee shop to discuss your business activities are. (eg.  fall sock order, kitchen remodel, AKC champion poodle’s breeding prospects). Actually 50% of the cost is the amount you can deduct.

According to the IRS 50%  (or an amount that is reasonable under the circumstances) of the cost of meals, entertainment, and, yes, coffee is tax-deductible. But if you claim you spent $1200 on java, they won’t just take your word for it. Along with your receipts, you’ll need records on:

  • date
  • place
  • persons present (not counting baristas)
  • duration of meeting
  • type of entertainment (drinking coffee)
  • business or benefit received

Good record keeping is the key! If you’re a procrastinator or not good with spreadsheets or don’t use a computer program to keep track of your expenses, go old school. Put your receipts from each meeting in an envelope and jot down the pertinent info on the outside, along with the dollar total amount. At the end of the year just add them up and give your accountant the total. Then tuck those envelopes away for a raining day should an auditor show up on your doorstep. Of course, you could meet them at your local cafe and get a deduction to boot (…Might want to check with the experts on that one). 

Are you wondering how long to hang onto your mountain of tax records? The IRS recommends anywhere from 3 to 7 years, depending on the category of deduction.  Categories such as owe additional tax, employment tax records, loss from worthless securities…I don’t want to talk about that one…and unreported income, all have different timelines. But be aware that tax laws are in flux.  Best practice, check with the IRS &/or your tax accountant.

www.irs.gov/taxtopics; Eric J. Adams, creativepro.com; Susan Ward, about.com; www.homepartyreview.com

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One Response to “CFF: Is Your Cup of Coffee Tax Deductible?”

  1. Katharine Lehmkuhl Says:

    Thanks for the timely FYI on tax deductions – that is one I’ve over looked, but I’ll be on it for 2011.

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