Taxpayer asks:
Thanks for taking the time to consider my question.
I travel extensively for my job. When I travel, I have an expense account for meals and hotels. My company recently moved to a “no alcohol” policy on expense accounts. We cannot put any alcohol on our expense accounts and we cannot apply for reimbursement for any alcoholic beverages.
My question is, if I have an occasional glass of wine for dinner, can I deduct that on my taxes as travel costs?
Taxgirl says:
I say yes, assuming that you otherwise meet the criteria for deducting your meals.
To the extent that your employer provides reimbursement for your meals, the reimbursement is not taxable to you (or deductible).
For meal and entertainment expenses which are not reimbursed by your employer, your deduction is limited to 50% of the expenses. They would be treated as unreimbursed job expenses and reported on Schedule A as a miscellaneous deduction. This means, of course, that they are subject to the dreaded 2% floor – in other words, you can only deduct those that exceed 2% of your AGI.
You can use the per diem method or the actual cost method when calculating the deduction. In your case, it makes sense to use the actual cost method since you are otherwise being reimbursed (or taking advantage of your expense account).
The normal rules of travel (business versus pleasure, etc.) still apply.
The key to your question, really, is whether your meals – and that additional glass of wine – is considered “lavish or extravagant.” The IRS will not allow a deduction for “lavish or extravagant” expenses. An expense is not considered lavish or extravagant if it is reasonable based on the facts and circumstances.
So use common sense. I think it’s reasonable to have a nice glass of wine at dinner. But I’m thinking a nice Sancerre or Shiraz – not a 1998 Petrus Pomerol. Similarly, I think you can justify a glass or two but not the cost of all night vodka shots. But really, it’s up to the discretion of the IRS as to what’s “reasonable” under the circumstances.
It’s worth noting that the IRS does not have an official position on alcohol beverages, nor a definitive amount for what’s considered “reasonable” (though the per diem amounts can be used as a guideline). What’s reasonable for one person may not be reasonable for another – just ask Hugh Heffner, who argued that very thing with the IRS.
Keep excellent receipts, use good judgment – that’s the best advice that I can offer.
Like any good lawyer, I need to add a disclaimer: Unfortunately, it is impossible to give comprehensive tax advice over the internet, no matter how well researched or written. Before relying on any information given on this site, contact a tax professional to discuss your particular situation.
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