Is My Coffee A True Business Expense?
Coffee shops are one of today's common meeting and work spaces. A question that I hear often happens to deal with those quaint, relaxing, invigorating, and yummy coffee shops. Often times entrepreneurs have a favorite place to patronize with clients or by themselves. Is that coffee deductible?
Sometimes yes, sometimes, no. It really depends. Let me break down a couple of scenarios:
Are you meeting with clients or potential clients?
Planning a meeting with clients at a coffee shop is quite common. According to IRS guidelines, you must partake in "substantial business discussion" to be counted as a deduction. A meeting with a client will almost always meet that threshold. After all, you are there to convince them to work with you. This is a true meals and entertainment (M&E) expense.
Are you there to use the wi-fi or to get a change of workspace scenery?
I get it. We we all need to get out and go somewhere sometimes, but there is no real business need for you to hunker down to work at your local Ziggy's or Starbucks, so that coffee is all on you. This is not a deductible meals and entertainment expense.
are you traveling?
If you are out of town overnight for business or work purposes, your morning coffee is most likely a deductible expense.
Are you meeting to network with other professionals in your industry?
Networking for your business is an important way to solidify connections. Remember that the IRS allows the deduction so long as “substantial business discussion” took place. Make sure you participated in the meeting for specific business benefits, not just to socialize. A good rule of thumb is to record who you met with so you can substantiate the expense if ever needed. This is most likely a deductible expense.
Do you have a client who owns a coffee shop?
While it's really good business to patronize your clients, if you were just working from a different location other than your regular work space or office, the IRS does not allow you to deduct that morning coffee or afternoon lunch expense. Why not? You would of had to eat lunch anyway, correct? If you are in your living vicinity you could have made coffee at home or packed your own lunch. This is most likely not a deductible expense. But...if you are sitting down with the coffee shop owner clients or other freelancers at your clients coffee shop, see the questions above about meeting with your clients and networking!