Intuit Academy Tax Practice Exam

Are meals purchased for business purposes fully deductible in the current tax year?

1. No, they follow 50% deduction rule

2. Yes, 100% deductible

3. No, only specific vendor transactions qualify

4. Yes, but only for onsite meals

The correct answer is: No, they follow 50% deduction rule

Meals purchased for business purposes are generally subject to the 50% deduction rule under current tax law. This means that only half of the cost of business-related meals can be deducted as a business expense on your tax return. The rationale behind this regulation is to ensure that meal expenses are not overstated, as they can often be a mix of personal consumption and business necessity. This deduction applies broadly to meals incurred while traveling for business or entertaining clients, but there are specific guidelines that dictate what qualifies and the circumstances under which the deduction applies. The other choices do not accurately reflect the current treatment of business meal deductions. While certain meal expenses may have specific rules or limitations, the general consensus is that these expenses fall under the 50% limitation. Understanding this regulation is vital for tax planning and compliance, as it allows businesses to maximize their allowable deductions while adhering to IRS guidelines.