Successfully navigating IRS rules for business-related meal and entertainment deductions can make a big difference in your practice’s bottom line.
Let’s break down how you can leverage these deductions effectively while staying compliant with IRS regulations.
50% tax deduction
Many expenses associated with business meals are eligible for a 50% deduction. Here are some examples that apply specifically to chiropractic practices:
1. Networking lunches: Meeting with potential referral partners like personal injury attorneys or local physical therapists over lunch qualifies for the 50% deduction if the meal involves a business-related discussion.
2. Tips and taxes: Don’t forget to include taxes and tips on meals that are a legitimate business expense.
3. Room rentals: If you host an event, such as a patient appreciation dinner or a community health talk, at a rented venue, the cost of the room is deductible as long as it passes the business relation test.
100% tax deduction
Certain situations qualify for a full 100% deduction. These meal and entertainment deductions could be strategic for your chiropractic or integrated practice:
1. Travel-related meals: When traveling to a professional seminar or conference, transportation costs to and from business meals may be deductible in full, depending on the circumstances.
2. Onsite meals: Providing meals for your chiropractic team is 100% deductible if meals are for the employer’s convenience and more than half of your staff benefits.
3. Public promotions: Hosting a free spinal screening at a community fair or a wellness lunch-and-learn event for the public could qualify as fully deductible.
4. Team-building events: Think about your annual office picnic or a holiday gathering for non-highly compensated employees. These expenses are completely deductible, making them both a morale booster and a financial benefit.
5. Business gifts: Giving small gifts to referring physicians or long-standing patients? You can deduct up to $25 per individual per tax year.
Nondeductible expenses
Be careful to avoid non-qualifying expenses. Common pitfalls for DCs include:
1. Non-business meals: Grabbing lunch with a colleague or patient without discussing business doesn’t make the cut.
2. Unused event tickets: If you purchase tickets to a sporting event but don’t attend, those costs aren’t deductible.
3. Membership dues: Fees for country clubs, golf clubs or other social clubs cannot be written off.
4. Lavish entertainment: Expenses that seem excessive or unreasonable could raise red flags.
5. Entertainment rules post-TCJA: Under the Tax Cuts and Jobs Act, entertainment expenses have been largely eliminated. However, meals related to business are still deductible based on updated IRS guidance from Oct. 3, 2018.
For meal and entertainment deductions, documentation is crucial
For every meal or entertainment expense, keep detailed records including receipts, invoices and a note on the business purpose and who attended. This is especially important if your chiropractic or integrated practice faces an audit.
Finally, consult with a qualified tax advisor to help you maximize deductions tailored to your practice’s needs while ensuring compliance. Remember, strategic tax planning isn’t just about saving money — it’s about making smart financial choices that support the growth of your practice.
Final thoughts on meal and entertainment deductions
By following these IRS guidelines and working closely with a tax professional, your practice can take advantage of every available deduction, fueling your financial success.
MARK SANNA is the CEO of Breakthrough Coaching. He is a board member of the Foundation for Chiropractic Progress, a member of the Chiropractic Summit and a member of the Chiropractic Future Strategic Plan Leadership Committee. He is the author of Cracking the Code: Marketing Chiropractic — How Chiropractors Align Spines and Minds, available on Amazon.com. To learn more, visit mybreakthrough.com.
