Can you deduct business meals if you paid cash?

Yes, you can deduct business meals if you paid in cash, but you must meet strict IRS record-keeping requirements. Because cash transactions do not leave a bank or credit card paper trail, they are highly scrutinized during audits.

To safely deduct a cash business meal, you must document the five Ws:

1. Who: The names of the people present and their business relationship to you.
2. When: The date of the meal.
3. Where: The name and location of the restaurant.
4. What: The amount spent (including tax and tip).
5. Why: The specific business purpose or discussion that took place.

The $75 Receipt Rule

• Under $75: The IRS does not strictly require a physical receipt for business travel and entertainment expenses under $75 (except for lodging). However, you must still record the transaction details in an expense log or diary at or near the time of the expense.
• $75 or More: You must have a receipt, invoice, or other documentary evidence to support the deduction, even if paid in cash.

Important Deductibility Limits

For the current tax year, business meals are generally 50% deductible. The meal must not be lavish or extravagant under the circumstances, and you (or an employee) must be present.