Americans spend a significant amount of money on food. A 2009 Bureau of Labor Statistics report showed that the average consumer spends 7.6 percent of his income on groceries and another 5.3 percent on dining out. Because groceries account for such a large portion of regular consumer expenditures, many taxpayers wonder whether they can claim grocery food items on their federal or state tax returns. Fortunately, groceries can be claimed on taxes in certain circumstances.
Personal Grocery Expenses
Groceries or food items purchased for personal use or consumption at home are rarely tax deductible. However, if your doctor prescribes a special diet or eating program, then foods and supplements purchased under that prescription, whether from a grocery store or a weight loss center, can be claimed as a medical deduction.
Work-Related Grocery Expenses
While it’s difficult to claim deductions for personal grocery expenses, work-related grocery purchases qualify as legitimate tax deductions in a wide variety of situations. Educators who purchase food items for classroom use, daycare providers who supply meals to daycare attendees and food writers or recipe developers who buy groceries to test recipes for publication can all deduct grocery items as legitimate business expenses. In addition, groceries purchased for business entertainment purposes, such as food and beverages for a holiday dinner party for clients or staff, may be claimed on taxes. Business owners should itemize deductions and file IRS Schedule C to claim the grocery expenses. Employees should claim grocery items under miscellaneous expenses when itemizing deductions. Finally, a taxpayer may claim a deduction for food eaten on business trips if the meal expenses are not reimbursed by his employer.
Groceries Donated to Charity
Food items purchased as a donation to a food bank or other recognized charitable organization may be deducted as charitable donations. Unfortunately, the purchase of food items directly given by the taxpayer to needy families is not tax deductible. In order for the IRS to consider a charitable contribution of groceries as an allowable deduction, the donation must go to a recognized tax-exempt charitable organization.
Sales Tax on Groceries
If a taxpayer cannot reasonably deduct groceries as an allowed personal or business expense or as a charitable donation, there is still a way to recoup a portion of the money spent on groceries. People who itemize deductions may either deduct state income taxes or sales tax paid throughout the year. In states that collect income tax, a taxpayer should elect whichever tax amount is higher in order to receive the greatest overall tax benefit. In states without income tax, residents should automatically choose the sales tax deduction.
Consumers have two options for calculating the sales tax deduction. They can save receipts throughout the year and add the total amount of sales tax paid on all purchases. Alternatively, they can use the sales tax tables in IRS Booklet i1040 (page 112) to determine the average sales tax deduction for their locale.