If you pay for meals for employees or for yourself under certain circumstances, the Canada Revenue Agency allows you to write off the cost of the meals as a business expense. The CRA has varying rules, but the basic amount you can claim as a deduction is 50% of the amount you incurred as expenses or 50% of a reasonable amount you can expect to pay. The deduction lowers the amount of income that the CRA considers taxable.
Claiming the CRA Meal Allowance
You may have several situations throughout a tax year to claim meal expenses. For example, say you travel 30 kilometres out of town to a conference that relates to your business activities. You spend $50 per day on food while attending the conference. You can claim a deduction of up to $25 for those meals. Or imagine you’re on a job site all day and you can’t get home or back to the office to get a meal for lunch. You spend $10 on food, which allows you to claim $5 in meal expenses for your remote site work.
If you don’t want to figure the 50% deduction, the CRA allows you to claim an expense of $17 per day for meals when you’re away from the office conducting business activities for an entire day. One reason to claim the $17 per day allowance is to reduce the need for keeping more accurate records. Keep in mind, though, that keeping track of your receipts may entitle you to a higher deduction.
Claim this tax deduction on Forms T2125, T2042, or T2121. You cannot claim any deduction for personal meal expenses.
Paying for Meals for Employees
When supplying meals for workers at a remote location, such as on a construction crew, your employees must not be able to able to return home daily to eat for you to claim this expense as a deduction. Rather than claiming this on Form T2125 as a direct business expense, which means you pay for something that you need for your business’s main activities, add these expenses to an employee’s T4 slip as a direct benefit. You then claim the deduction as part of that employee’s salary or labour expense. Your employees have to pay income tax and Canada Pension Plan contributions on that amount. The 50% rule doesn’t apply here, because employees pay the tax on the benefit.
If you host an on-site cafeteria where employees pay for meals, you can’t count it as an expense. In this case, your employee pays a small fee to cover the cost of the food and preparing it. The fee covers your expenses so you don’t have to worry about a write-off, nor does your employee have to report that amount as a taxable benefit.
Write-Off the Entire Meal and Food Deduction
In some cases, you can write off the entire cost of the food that you provide. If you incur expenses for an office party or a similar event, you can write off the entire amount you spend for each event. The CRA limits you to six office events per year in which you supply food for your employees.
If you host a gathering that raises funds for a registered charity, you get to deduct the entire cost of hosting the event, including food served to guests. You also get to write off the entire cost of meals if you give away food as compensation to customers.
Keeping accurate financial records is the key to claiming these deductions on your taxes. QuickBooks Online allows you to track expenses for easier retrieval later when you need to run expense reports at tax time. QuickBooks Online can help you maximize your tax deductions. Keep more of what you earn today.