When traveling away from home on business, you may incur expenses for meals and entertainment. You can deduct 50% of meal and entertainment costs incurred when traveling locally, overnight, or long distance for your rental (business) activity.

So if you get hungry driving across town while going to pickup the rent check (or showing a house), consider taking a prospect out to lunch. Deducting half of your combined expense may be more beneficial than not being able to write-off your own meal.

Keep in mind that meal and entertainment costs are deductible only if they are considered ordinary and necessary for managing your investments (running your business). So you can’t just take a client to a movie theater and write off the ticket admission. However, if you went out to a steakhouse with a client to discuss investment opportunities  – you can probably deduct half of the cost.

In this post I am mostly referring to Schedule E for rental owners (your CLIENTS, and YOU if you own rental property). If you are strictly a real estate agent and you don't have "rental activity," your expenses are reported on Schedule C. The 50% rule still applies. Also, there is a "standard meal" rate that you can use, but that gets a bit complicating - you should talk to a tax advisor for that one.

I hope this explanation was easy to understand and that it can be helpful for you or your clients. To learn more about which meal and entertainment expenses can be deduct from your Schedule E, take a look atthese tips.