Are Meal Allowances Tax Deductible On Business Travels

Are you an employer who is wondering if meal allowances are tax-deductible? Better yet, are you an employee who is required to travel for work? Is your meal allowance tax-free? Learn the benefits and regulations towards food and meal taxes while traveling. Take a bite out of this week’s Tax Tip.

Does your job require you to travel? Ever wonder if your meal allowance while traveling is tax-free?? This blog is going to answer two main questions:

1. Are meal allowances paid to employees while travelling deductible to the employer?
2. Are meal allowances received by an employee tax-free to him or her?

When your employer reimburses you for meals consumed while you are traveling outside of your metropolitan area, you do not have to include the amounts received in your taxable income. Think about the Greater Toronto Area or the Greater Vancouver Area to understand the meaning of a Metropolitan area. Learn how you can reduce your taxes while using public transit. 

Likewise, your employer can deduct the full amount of the meal allowance as an expense. However, there is one catch! The amount of the allowance must be reasonable. The Canada Revenue Agency considers an allowance for up to $17 per meal to be reasonable.

You can also receive a tax-free meal allowance when traveling within the city as long as these three conditions are met.

1. You are travelling away from the office for work
2. The amount of the allowance received is not more than $17 per meal
3. You can work more efficiently by having your meal outside of the office, rather than travelling back to the office to eat.

Let us look at an example.

Frank works for an IT service company. He has to travel to the client’s site, which is approximately an hour away from his office. He decides to have lunch at the client’s site rather than travel back to the office to eat. Since it is more efficient for Frank to have his lunch where he is physically working for the day, an employer who provided meal allowance for that day will not be taxable to Frank, and will also be fully tax-deductible to his employer.

So here is the tip!

Ask your employer for a tax-free meal allowance while traveling. Both you and your employer will come out ahead.

Wine and dining a client? Learn how to deduct meals and entertainment for clients from the business income.

ABOUT THE AUTHOR

ALLAN MADAN

CPA, CA

Allan Madan is a CPA, CA and the founder of Madan Chartered Accountant Professional Corporation. Allan provides valuable tax planning, accounting and income tax preparation services in the Greater Toronto Area.

Related Resources