Can I Write Off Alcohol as a Business Expense?

Feb 28, 2024 | Deductions

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Managing expenses is a crucial aspect of maintaining a thriving business, no matter your niche.

And as a seasoned coach or consultant, you’ve probably thought about the usual tax-deduction suspects by now: office supplies, CRM platform fees, conference and continuing education costs…and the list goes on.

But have you considered deducting the cost of (gasp) alcohol?

I’m not kidding.

Sometimes the IRS considers it to be a deductible expense for qualifying businesses.

But let’s not get ahead of ourselves here.

(I’m looking at you, reader who’s sipping on the gin and tonic while you read this very important, ultra-business-y blog.)

Remember: just because something is kinda sorta related to your business does not give you a free pass to claim it on your taxes.

So when it comes to the question of writing off alcohol, what exactly are the rules? And how can you do it while staying compliant with tax laws?

Keep reading to find out.

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The Role of Alcohol Expenses in Your Coaching or Consulting Business

While many business-related expenses qualify for deductions, the treatment of alcohol expenses is subject to specific rules and limitations.
As a coach or consultant, you may find yourself in situations where alcohol is involved in client meetings, networking events, or business dinners.
Understanding how these expenses are treated under the tax code is essential for optimizing your deductions…legally speaking.

What Situations Permit Alcohol as a Business Expense?

Imagine it’s Friday night and you managed to snag a much-coveted seat at your local sushi bar. While you’re ordering your Otoro nigiri at $50 a piece (in our hypothetical reality we have a lot of sushi cash to spend), a client taps you on the shoulder to say hello.

You soon find yourself in a spirited conversation about travel and adventurous eating. You order another round of sake and offer some to your client/friend. Soon the conversation turns to business. After talking shop for a while, your client says goodbye and you order one more roll.

Are there any tax deductions to be had? Or are you personally on the hook for the full bill?

Here’s what you have to consider:

  1. Was the meal (and accompanying alcohol) ordinary and necessary? Is it customary in your industry to meet with clients at upscale sushi bars? Was the meeting directly related to business? Or did business just come up from time to time?
  2. Was there a clear business purpose for the meeting? Did you plan this meeting to discuss business? Or did it happen by chance
  3. Was the meal and/or drink directly related to your business? Was the main purpose of the meal to conduct business, chat about business matters, or grow your business
  4. Did you document the meeting and meal? Do you have receipts, invoices, and notes about what was discussed and with whom?

If you answered “no” to any of the questions above, I am sad to tell you that your $50-a-bite sushi meal is 100% on you, not your business.

But if you answered “yes” to all of the questions above, move on to the next section.

The 50% Limitation Rule

The IRS imposes a 50% limit on deductions for business-related meals and entertainment expenses, including alcohol. This means that only half of the qualifying expenses can be deducted on your business tax return. Which kind of stinks. But hey, half is better than nothing, right?

Expenses Can’t Be Extravagant

Also keep in mind that any drinks consumed during a business meeting must be financially reasonable. Excessive or lavish spending could be subject to scrutiny by the IRS.

Consulting With a Tax Pro Is Always Beneficial

Navigating the complexities of tax deductions for coaches and consultants, including alcohol expenses, can be time-consuming and challenging. Consulting with a qualified tax professional who specializes in your business niche is always a good call.

Professionals like TSJ can provide personalized tax guidance tailored to your unique business and industry, helping you maximize your write-offs without risking expensive errors or non-compliance with tax laws.

Conclusion: Yes, You Can Deduct Alcohol – As Long As You Follow The Rules

While deducting meal and alcohol expenses as business deductions is possible for coaches and consultants, it’s vital that you understand when it is legal to do so and how to do it correctly.

After all, the last thing you want is to end up in legal or financial trouble over a bottle of luxury sake…no matter how tasty it was.

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I’m the passionate tax-pert behind Tax Savvy Jessica. I spent more than 10 years performing audits for the IRS. My experience there taught me how to understand taxes from the perspectives of both taxpayers and the IRS.

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