Question: Can I write off alcohol as a business expense?
Answer: Yes, you can write off alcohol as a business expense.
- IRS Publication 463 explicitly states that beverages are deductible
- IRS Publication 463 states that food, beverages, taxes, and tips are deductible as a “meals & entertainment expense” or as a “travel expense”
- To deduct meals and beverages as a “meals & entertainment” expense, you or your employee must be present
Please note certain rules for deducting alcohol as a tax write off:
- Only 50% of your alcohol expense will be deductible. The same rule applies to meals as well as entertainment expenses. So if you invite a client to go out drinking or you attend a social function for networking purposes, only half of your tab is deductible. So if your bill is $80, then you can only deduct $40 on your tax return.
- The alcohol expense should not be lavish. Although alcohol is deductible, it should be ordinary (which is still subjective), but don’t stretch the definition of “ordinary” and try to deduct a $10,000 bottle of wine. It’s a case-by-case scenario, so if you provide $10,000 worth of wine to a group of 100 people for business purposes, that would sound reasonable and ordinary compared to 2 people sharing a $10,000 bottle of wine. That sounds excessive, lavish, and on the total opposite end of the spectrum of “ordinary”. If you were ever audited and that transaction was reviewed by the IRS, it would most likely get denied as a deduction.
- If the alcohol purchased is for a formal event or brought on-site to your place of work, then it is actually 100% deductible, rather than 50%. For example, if you are throwing a company Christmas party, the alcohol would be fully deductible. However, if you decide to go out drinking with your employees on the whim, informally, on a random night, then that’ll be 50% deductible.
There are a lot of special rules revolving around alcohol, meals, and entertainment, but this is probably sufficient information to answer your question of “can I write off alcohol as a business expense?”