A common question from real estate investor clients is “Is my lunch tax deductible?” The answer can be tricky. For example, I received the following version of that question:
Question: We prepped a property for a tenant turnover – was our lunch tax deductible?
My husband and I painted and shampooed the carpet at our condo yesterday after our tenant moved out and prepared the place for the new tenant to move in. We obviously needed to eat so we got lunch. Should we save the receipt for lunch to put as our expense for the year-end? Does that mean we can make our lunch tax deductible?
Answer: It might be a tax deduction
Meals and entertainment are tricky expenses, and subjective/confusing in practice. But there are some exceptions to what can and cannot be a meals and entertainment deduction.
Assuming that someone owns a few properties, and they are out of town a distance of 40 km’s and you’re there more than 8 hours (in some cases 12), then the meals are more likely deductible.
Alternatively if you are having a meal with a prospective tenant, supplier, your trusty accountant, your mortgage broker, your lawyer, or other team member, then there are no time/distance restrictions. They are deductible as there is a clear business purpose.
The primary issue in the CRA’s mind is similar to what you indicated in your question. You obviously had to eat, so the CRA is saying “Why should real estate investors get to deduct their meals at work when nobody else does?”
Practically speaking, while it is not a bad idea to claim meal expenses once in a while, it’s more of an an administrative concession from the Canada Revenue Agency (CRA) as compared to a technical ability to make the deduction in some cases.
Resources on tax deductible lunches
For additional resources related to whether your lunch is tax deductible:
Tax Checklist – Business or Professional Activities (highlights the meals and entertainment expense)
More questions?
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Remember – circumstances are unique! This information is summary in nature. Seek out advice from your tax advisor about your specific situation.
