The Fundamental Requirements for a Reimbursable Breakfast
For a breakfast to be considered a reimbursable business expense, it must meet specific criteria outlined by tax authorities like the IRS and further defined by individual company policy. The core principle revolves around the meal being an ordinary and necessary expense incurred while an employee is conducting business away from their regular place of work. Without meeting these foundational rules, a breakfast expense will likely be denied.
Travel Away from Your Tax Home
One of the most important stipulations for a reimbursable breakfast is that the employee must be 'away from home' for a period long enough to require a substantial sleep or rest period. This does not include a regular commute to the office, a day trip where you return home the same day, or simply working remotely from your personal residence. The IRS defines your 'tax home' as the entire city or general area of your main place of business, regardless of where your personal residence is. If you are traveling outside of this area on an overnight trip, meals like breakfast become eligible for reimbursement.
The Bona Fide Business Purpose
Every business expense, including a breakfast, must have a legitimate business purpose. This means the expense is connected to the active conduct of your trade or business. For a breakfast, this could mean:
- The meal occurs during an overnight business trip where you are dining alone.
- You are having breakfast with a client, customer, or business contact to discuss business matters.
- The meal is part of an all-day conference or training event. In all cases, the expense must be considered reasonable and not 'lavish or extravagant,' as determined by the facts and circumstances.
Documentation and Record-Keeping
Proper documentation is the lynchpin of a successful expense claim. For actual expenses, the IRS requires receipts for transactions over $75, but most companies require receipts for all expenses, regardless of the amount. Your documentation should include:
- The date and time the meal was purchased.
- The name and location of the restaurant or establishment.
- The total amount of the expense, including tax and tip.
- A specific description of the business purpose of the meal.
- The names and business relationships of the individuals in attendance, if dining with others. Good record-keeping is not only a requirement for compliance but also ensures transparency and prevents delays in reimbursement processing.
Actual Cost vs. Per Diem Reimbursement
Employers can choose to reimburse employees for breakfast using one of two primary methods: actual costs or a per diem allowance. The choice between these two approaches has significant implications for both the employee and the company's finance department.
Comparison Table: Actual Costs vs. Per Diem
| Feature | Actual Costs Reimbursement | Per Diem Allowance |
|---|---|---|
| Ease for Employee | Requires meticulous saving of receipts and detailed expense reports. | Simple to track; no receipts for meals needed if within allowance. |
| Budgeting for Company | Less predictable; total cost depends on employee spending habits. | Highly predictable; a fixed daily rate makes forecasting simple. |
| Documentation | Requires itemized receipts for each meal and proper record-keeping. | Requires only a record of travel dates and location; less administrative burden. |
| Flexibility | Allows for more accurate reimbursement in high-cost areas. | Can be too generous in low-cost cities or too restrictive in high-cost cities. |
| Suitability | Best for companies requiring high precision or for employees with infrequent, high-cost travel. | Ideal for frequent, predictable travel; prioritizes efficiency over surgical accuracy. |
The Role of Company Policy and IRS Rules
Company policies typically specify which reimbursement method is used and set specific limits on spending, such as requiring employees to choose 'reasonably priced establishments'. The company policy provides the framework, but the IRS rules define the tax treatment. It's important to remember that most business meals are only 50% deductible for the employer, though this can vary depending on specific circumstances. When a company opts for the per diem method, it often uses or references the standard meal and incidental expense (M&IE) rates published by the U.S. General Services Administration (GSA).
Handling Meals Included in the Hotel Rate
Many travelers encounter a situation where the hotel they are staying at provides a 'free' breakfast. In reality, the cost of the breakfast is often built into the room rate. When this happens, an employee on a per diem allowance must deduct a portion of the per diem for that breakfast to avoid double-dipping. For employees on an actual expense plan, they simply would not expense the meal since it was not an additional, out-of-pocket cost. Failing to properly account for included meals can be flagged during an audit.
Conclusion
What constitutes a reimbursable breakfast is more nuanced than simply buying food while on a trip. It is defined by a combination of factors, including the nature of the travel (requiring an overnight stay away from home), the presence of a legitimate business purpose, and meticulous documentation. The method of reimbursement, whether actual cost with receipts or a per diem allowance, is set by company policy but must operate within the boundaries of tax law. Understanding these rules is key to a smooth expense reporting process for everyone involved.
For more detailed information on tax laws for business travel expenses, consult IRS Publication 463 (2024).
What if You Work from Home?
For the growing number of remote employees, the rules for meal reimbursement are particularly strict. Generally, meals purchased at your home while working are not reimbursable business expenses, as they are considered personal living expenses. A remote employee would only be eligible for meal reimbursement if they are traveling away from their home for a business purpose and staying overnight. Company policies for remote employees may cover other expenses, such as home office equipment, but not daily food costs.
Special Considerations for Specific Situations
Some scenarios require additional attention to detail. For example, if you are traveling with clients and the breakfast involves significant discussion of new or ongoing business, it may be treated differently than a solitary meal. The business purpose is paramount. Similarly, if you are a traveling transportation worker (e.g., a truck driver), the IRS provides special, higher per diem rates to account for the unique nature of your work. This highlights that context and proper categorization are essential for correct reimbursement and tax treatment.
