Introduction – When are food expenses deductible?
The Income Tax Act and case law allow for various deductions for employees and businesses. Many of these deductions relate to costs incurred to produce income. Generally, the Income Tax Act does not permit deductions for expenses that are personal in nature (e.g., food and clothing) because they provide a personal benefit and are not directly tied to earning income. This limitation is designed to prevent individuals from abusing deduction provisions for personal gain.
However, there are exceptions where certain personal expenses, such as the cost of food, may be deductible. As a general rule, the cost of meals is not a deductible expense, although there are some exceptions.
Employees deducting food expenses
Employees can deduct food and beverage expenses if their employer requires them to be away from their regular place of work for at least 12 consecutive hours. This deduction is permitted under subsection 8(4) of the Income Tax Act.
To qualify, employees must be away from the municipality or metropolitan area where they ordinarily work. For example, someone working in Toronto cannot deduct food expenses if they are still within Toronto, even if they are working for more than 12 hours.
However, if they are required to work in Hamilton for over 12 consecutive hours, they may deduct the cost of food and beverages while there. Importantly, the hours must be consecutive: spending six hours in Hamilton, returning home, and then spending another six hours there will not meet the requirement.
Businesses deducting food costs
Businesses face restrictions on deducting food as a business expense under section 67.1 of the Income Tax Act. This provision limits businesses to deducting a maximum of 50% of the lesser of:
- The amount actually incurred, or
- An amount that is reasonable in the circumstances.
This means that not only can businesses deduct only half of the cost of meals, but the cost must also be reasonable. A lavish or excessive meal may be challenged by the CRA. Consulting a Canadian tax lawyer can help businesses understand when expenses are considered reasonable and avoid potential disputes.
Self-employed individuals deducting food costs – Scott v. Canada
Self-employed individuals may deduct food expenses when the food is considered analogous to fuel. In Scott v. Canada, the Tax Court of Canada found that a foot and transit courier, who spent the day moving packages across Toronto, could deduct the excess cost of food consumed during work.
The court likened the food to the fuel required by a taxi—essential to the operation of the business. In short, if food functions as a necessary and direct input to earning income, the excess may be deductible. If food costs are generally $20 and the taxpayer now has food costs of $30 after starting a courier job, then only $10 is deductible.
Pro tax tip – s.67.2(2)(f)
Under paragraph 67.2(2)(f), businesses can fully deduct the cost of food and beverages for up to six parties each year. If meals are part of these allowable events, the usual 50% limitation does not apply. However, the party is still subject to other rules in the Income Tax Act.
Consider reaching out to a top Canadian tax lawyer if you have any questions or concerns regarding deducting the costs of a party or any other food-related expenses.
FAQ
Can trades workers deduct food expenses?
No. Although food might seem analogous to fuel for physically demanding jobs, the court in Scott stressed that the analogy applies only in a near-literal sense. For example, construction workers cannot claim a deduction for meals under the Scott reasoning unless they meet the specific criteria.
Are travel meals always deductible?
No. Travel meals are only deductible if the taxpayer meets the statutory requirements, such as being away from the usual place of work for at least 12 consecutive hours (for employees) or meeting the conditions for business or self-employed deductions. Personal trips, even if work is discussed, generally do not qualify.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
