Can I Deduct my Coffee? Understanding the Meals & Entertainment Deduction

One of the most common questions I get pertains to doing work in coffee shops. Many entrepreneurs head to their local coffee place to meet clients, do work, or just get out of the house. Is that coffee deductible?

Well, it depends.

Were you meeting with clients or potential clients? 

Meeting with clients is an common business activity for freelancers, and a lot of those meetings take place in coffee shops. The IRS requires “substantial business discussion” at the meeting, and chatting with a client will almost always meet that threshold – you are there to convince them to hire you, after all.

Answer: Deductible!

Were you networking with other professionals in your industry?

Networking can be an important way to grow your business and further your connections in your field. Grabbing coffee can often lead to new information about your industry or new clients. Remember that the IRS requires that “substantial business discussion” took place, so you’ll want to make sure you participated in the meeting for specific business benefit. It helps to record who you met with so you can substantiate the expense if needed.

Answer: Most likely deductible!

Were you traveling?

If you were away from home overnight for work purposes, you most likely qualify to deduct your meals – including that morning coffee.

Answer: Most likely deductible!

Were you at a local client site?

If you were in your home town, just working from a different location that your normal office, the IRS does not allow you to deduct that morning coffee or afternoon lunch expense. Why not? Well, you were probably going to eat lunch anyway, right? If you are in your home town you could have made coffee at home or brown-bagged your lunch.

However, if you are eating with the clients or other freelancers on the project, see the info above about meeting with clients and networking!

Answer: Probably not deductible!

Were you there just to use the wi-fi or get out of your house?

While we all need to get out of the house sometimes, there was no real business need for you to head to Starbucks, so the coffee’s on you.

Answer: Not deductible!

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