Tips for servers or bartenders at a business meal are deductible, but there's no "tip expense" category on your tax return. Instead, you claim tips as part of your total meal expense. You can also write off tips to cabbies, valets, maids and other non-meal related people as travel expenses.
Travel
-
If you're away from home on business long enough that you need to sleep, meals are tax deductible. That includes the cost of food, drinks, sales tax and tips for the servers. You can only write off 50 percent of the total, and the Internal Revenue Service might not allow the entire deduction if the meal is extravagant. There's no dollar figure for extravagance; it's a matter of good judgment and circ*mstances.
Entertainment
-
Whether you're at home or abroad, you can deduct meals that have a business purpose. This includes meals during a business conference, meals where you talk business and meals right after or before a business meeting. The write-off follows the same rules as meals while you travel, so you take a 50 percent deduction for expenses, including tips. You can't double dip if you entertain while traveling: it's a meal expense or an entertainment expense, not both.
Work and Fun
-
It's fine to take your family on a business trip, but unless they're employees, you can't deduct money for their meals. If your business trip includes a weekend visiting friends, the meals, lodging and mileage for that part of your travel aren't deductible. The same rules apply to entertainment expense: You can't write off your wife's share of a business dinner or the associated tips. The IRS allows an exception if you have to invite a client's spouse and bring your own for company.
Records
-
To protect your deductions if you're audited, you need written records. Meal receipts, including the tip, help prove your claim, and so do credit card bills. You must also be able to identify the business reason for your trip or the business purpose behind your entertainment expenses. The IRS gives you the option of claiming a per diem meal rate set based on your location instead of reporting the actual cost of the meals. That's simpler, and you don't have to track the cost of tips.
