Your Team Lunch May Be 100% Deductible

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Are you getting the most out of your investment in your team?

Lifestyle perks, like regular in-office lunches, can significantly round out an employee’s compensation package. And since these lunches are typically 100% deductible, they are a smart, scalable way to invest in employees. Relieving employees of the expense and the planning that goes into buying, preparing, storing or leaving for lunch takes stress off of their plates and allows them to focus on far more important responsibilities.

Food works well as a perk because everybody eats. It’s a natural connector in the office, and free meals are something that employees quickly see, feel and taste the value of.

It’s certainly a convenience to an employer to keep employees in the office during lunch. Some calculations estimate that the cost of one of employee leaving the office during the lunch hour amounts to $10,400 per year. For an office of 100, that’s $1,040,000 per year. Sharing a healthy lunch together is economically beneficial to a company, regularly boosts morale, encourages wellness, allows for a true pause in the day and spurs creativity.

Knowing when a food expense may be deductible can be significant for companies who are regularly using food to treat their staff.

Generally, there are several criteria which must all be met when determining if a food expense can be identified as 100% deductible:

  • The location: For a lunch to qualify for being 100% deductible, it typically must be served on the employer’s premises. Out-of-office lunches at restaurants usually fall in the 50% deductible category.
  • The recipients: For an in-office lunch to be 100% deductible, it must also be provided to more than half of the office.
  • The purpose: Finally, the in-office lunch must also serve as a convenience to the employer to be considered 100% deductible. For example, if an employer is providing meals for working extra hours and staying in the office, the meal would be a means of enticement and most likely qualify for full deduction.

For a fast-growing startup, the benefit of keeping employees together during the lunch + rewarding them for their hard work is obvious. How to account for it tax-wise is not so obvious. We encourage you to check out these other resources as you explore the benefits of an in-office lunch program and consult your accountant on what works best for your team.

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