Meal & Travel Expenses for Corporate Tax Filing

woman reading text messages on a cellphone while sitting alone at a counter in a cafe enjoying a meal

Meal expenses are a common tax deduction for many individuals, but determining what is and isn’t taxable can be confusing, especially when it comes to corporate tax planning.

The Canada Revenue Agency (CRA) sets out specific rules and regulations for what can be claimed as a meal expense, and it’s important to understand these guidelines to avoid any tax complications.

In this article, we’ll explore what is and isn’t taxable when it comes to meal and vehicle rates, the difference between meal, travel, and entertainment expenses, the limits to meal expenses, how to claim meal expenses on your tax return, and if any of this differs if you’re self-employed.

Let’s get started!

What’s Taxable and What Isn’t When It Comes to Meal and Vehicle Rates

When it comes to meal and vehicle rates, not all expenses are created equal.

The CRA sets out specific guidelines for what can and cannot be claimed as a deduction.

In general, meal expenses are only tax-deductible if they are incurred while you are away from your usual place of business or employment or if you are required to work overtime and cannot reasonably return home for a meal.

If you travel for work purposes, you can claim meal expenses with the CRA as long as the travel is for a duration of 12 hours or more.

The CRA also sets out specific rules for vehicle expenses. If you use your personal vehicle for work purposes, you can claim expenses such as gas, insurance, and maintenance.

However, you can only claim the portion of these expenses that relate to work-related use.

For example, if you use your car 50% of the time for work purposes, you can only claim 50% of the expenses.

Is There a Difference Between a Meal Expense, a Travel Expense, and an Entertainment Expense?

It’s important to understand the differences between meal expenses, travel expenses, and entertainment expenses.

Meal expenses are costs associated with food and beverages while traveling or working away from your usual place of business.

Travel expenses are costs associated with travel, such as transportation, accommodation, and meals.

Entertainment expenses are costs associated with entertaining clients or customers, such as tickets to sporting events or meals at restaurants.

How Are Meal and Travel Expenses Calculated?

To calculate meal and travel expenses, you can choose between the detailed or simplified method.

The detailed method allows you to claim the actual amount you spent, while the simplified method uses a flat rate for vehicle and meal expenses.

Keep your receipts if you use the detailed method, but note that the CRA may still request documentation if you choose the simplified method.

Your total travel expenses include travel assistance provided by your employer and any expenses you paid for.

Is There a Limit to Meal Expenses When I File My Taxes?

Yes, there is a limit to meal expenses when filing taxes with the CRA, and it depends on the method chosen to calculate the expenses.

If using the simplified method, the limit is $23 per meal, to a maximum of $69 per day per person.

However, if using the detailed method, the limit is the actual amount spent, with receipts required as documentation.

How Do I Claim Meal Expenses on My Return?

Claiming meal expenses on your tax return can be a straightforward process if you keep accurate records, follow the eligibility criteria set out by the CRA, and enter the information correctly on your tax return.

By taking the time to understand the rules and regulations, you can reduce your tax bill and avoid any complications with the CRA.

Here are the steps to follow:

Step 1: Keep Accurate Records

To claim meal expenses on your tax return, you need to keep accurate records and receipts of all meals and beverages purchased for business purposes.

These records should include the date, location, cost, and business purpose of each meal.

Make sure you keep these records organized and in a safe place.

Step 2: Determine Eligibility

Meal expenses are only tax-deductible if they are incurred while you are away from your usual place of business or employment or if you are required to work overtime and cannot reasonably return home for a meal.

If you travel for work purposes, you can claim meals as long as the travel is for a duration of 12 hours or more. Make sure your expenses meet the eligibility criteria set out by the CRA.

Step 3: Calculate the Amount

Calculate the total amount of meal expenses you are eligible to claim on your tax return.

Remember to only claim expenses that are incurred for business purposes and that meet the CRA’s guidelines.

Step 4: Enter on Tax Return

On your tax return, enter the total amount of meal expenses you are claiming as a deduction against your income.

Be sure to follow the instructions on your tax return carefully to ensure you are entering the information in the correct place.

Step 5: Keep Supporting Documents

Make sure you keep all supporting documents, including receipts and records of each meal, in case the CRA requests them for verification.

These documents should be kept for at least six years from the end of the tax year to which they relate.

Is Any of This Different if I’m Self-Employed?

If you’re self-employed, the rules and regulations for claiming meal expenses are slightly different.

You can claim meal expenses as a deduction against your self-employment income as long as they are incurred for business purposes and meet the CRA’s guidelines.

However, it’s important to note that you cannot claim meals that are considered personal or private in nature, such as meals with family or friends.

In addition, if you’re self-employed, you can also claim vehicle expenses related to your business.

This includes expenses such as gas, insurance, and maintenance.

However, you can only claim the portion of these expenses that relate to work-related use, similar to when you use your personal vehicle for work purposes as an employee.

Understanding Meal and Travel Expenses for Corporate Tax Filing

Understanding the guidelines and regulations surrounding meal and travel expenses can save you time and money when it comes to filing your corporate tax returns.

By keeping accurate records and receipts and ensuring that your expenses meet the eligibility criteria set out by the CRA, you can claim meal expenses as a deduction against your income.

It’s also important to note the differences between meal, travel, and entertainment expenses and to keep personal and private expenses separate from business expenses.

If you’re still unsure about how to claim your meal and travel expenses, it’s always a good idea to seek the advice of a professional.

At Liu & Associates, we specialize in corporate tax filing and can help you navigate the complicated world of tax regulations.

Contact us today for a consultation, and let us help you maximize your tax deductions while staying compliant with the CRA.