The business meal deduction has been doubled.
There’s good news for businesses. The COVID-19 Relief Bill increased the deduction for business meals in tax years 2021 and 2022.
Normally business meals are 50% deductible. However, the meal business deduction has been increased to 100%.
Fortunately, food and beverage expenses also include the cost of delivery fees, tips, and sales tax.
The deduction applies to food and beverages provided by a restaurant, however, there must be a business purpose.
The objective of this law is to help stimulate the restaurant industry. Fortunately, other businesses will benefit also from the deduction being doubled as well. This law provides a great opportunity to show appreciation to your workers and clients by taking them out for lunch or dinner.
It also provides a good reason to support your favorite restaurants that may be struggling due to the financial hardship caused by the pandemic.
The deduction applies to meals while on business trips out of town.
It includes meals provided for the convenience of the employer (such as occasional overtime).
Meals in office meetings of employees, stockholders, agents, or directors are 100% deductible if the meals are provided by a restaurant.
The term “restaurant” isn’t defined by the Internal Revenue Code. However, it would include any typical restaurant and caterer. Convenient stores that also sell food may not qualify.
Meals included in charitable sports packages are also included.
To be deductible as a business meal, the food or beverages must not be lavish or extravagant. However, the IRS will rarely second guess you if you have adequate documentation. And you are not barred from eating at deluxe restaurants.
The following expenses are not deductible:
- Sporting event tickets
- Transportation to/from a restaurant for client business meals
- Club memberships and club-related expenses
- Meals during entertainment that are not listed separately on the invoice
The new tax law is good news for the restaurant industry and other businesses as well.
Don’t forget to take advantage of this bigger deduction.
David Zubler is a tax accountant and Enrolled Agent in East Tennessee, providing tax strategies and representing clients before the IRS and has over 25 years of tax experience. He is the author of six tax books and has shared tax advice on national TV. He is the founder and president of Your Tax Care. The company provides business and tax education, including David’s one-minute tax tip radio recordings at YourTaxCare.com. David can be reached at (865) 363-3019 or contacted by email at firstname.lastname@example.org.