The meals and entertainment deduction: why you only get to claim half

Which half of a bill is deductible is decided by who was there and why, and that is worth settling before the year-end rather than after. Ask about one claim. Working from home raises a different question; see how a corporation can pay for a home office.

Meals and entertainment expenses the CRA allows

The rate is the easy half. The condition in the third column is what decides which row you are actually in, and it is where the claims that fail tend to go wrong.

The basic rule: claim half

When your business pays for a meal with a client, a coffee meeting with a prospect, or tickets to an event, the natural assumption is that the whole cost is a deductible business expense. It usually isn’t. CRA’s general rule is that food, beverages and entertainment are deductible at 50% of the lesser of the amount you actually paid and an amount that is reasonable in the circumstances. The logic is that a business meal always carries a personal-consumption element. You had to eat anyway, so only half is treated as a genuine business cost.

The cap includes the whole bill

A detail that surprises people: the 50% limit applies to the entire bill, not just the food. GST/HST, the tip, delivery fees and any cover or service charge all get folded into the amount that’s then cut in half. A $100 dinner that comes to $120 after tax and tip yields a $60 deduction, not $60 plus the tax and tip on top. It’s worth remembering this when you’re estimating the real after-tax cost of client entertainment.

The exceptions worth knowing

Several situations escape the 50% limit. The ones most relevant to small businesses:

• Staff events — 100%, up to six per year. If you host an event such as a holiday party or a summer barbecue and invite all employees at a particular location, the meal and entertainment cost is fully deductible. CRA allows up to six such events in a year at 100%; beyond that, the 50% rule returns.
• Long-haul truck drivers — 80%. Meals consumed by a long-haul truck driver during an “eligible travel period” (broadly, a trip of at least 24 continuous hours away from the driver’s home municipality while transporting goods) are deductible at 80% rather than 50%.
• Billed-through and reimbursed costs. If your business is one that regularly provides food, beverages or entertainment for compensation, a restaurant or caterer, say — the limit doesn’t apply to those costs. Similarly, if you bill a client for a meal and itemize it on their invoice, the 50% cap effectively passes to them.
• Fund-raising events. Meal and entertainment expenses for a charitable fund-raising event can be fully deductible.

ITC on meals and entertainment: the GST/HST credit is halved too

The 50% rule doesn’t stop at income tax. If you’re a GST/HST registrant claiming input tax credits, the credit you can claim on most meal and entertainment expenses is also limited to 50% of the GST/HST paid. In practice, many businesses claim the full ITC through the year and then make a single adjustment to add back the 50% at year-end, which keeps the bookkeeping simple while still landing in the right place. Either way, the net effect mirrors the income-tax treatment: you recover half.

Records are what make it hold up

A meal deduction is only as good as the record behind it. Keep the itemized receipt (not just the credit-card slip), and note who you met and the business purpose — “lunch with [client] re: [project]” is enough. In a review, CRA is looking for evidence that the expense was incurred to earn business income; a pile of undocumented restaurant charges is exactly the kind of thing that draws questions.

Consistent, contemporaneous notes turn a shaky claim into a defensible one, and they take seconds at the time versus hours to reconstruct later. The same discipline applies to business travel and convention expenses, and to the dues and subscriptions that arrive as emailed receipts and never touch a file.

This article is general information for Canadian business owners and is current as of July 2026. It is not tax, legal or accounting advice, and it does not create a client relationship. Tax rules change and your situation is unique, so please speak with a CPA before acting on anything here.

The 50% limit also reaches into marketing spend, because a client gift of food, drink or event tickets is caught by the same rule. See advertising and promotion deductions for how the rest of a campaign budget is treated.

Whether any of this applies to you turns on your year-end, your structure and what else is in the picture — ask about your own situation and a CPA replies, usually the same business day. Free either way.

The 50% limit is only as accurate as the coding behind it: meals and entertainment kept in their own account make the year-end add-back a number rather than an estimate, which is part of monthly bookkeeping done properly.

Monthly bookkeeping with meals and entertainment coded separately starts from $325 a month.