Updated: Jul 6
Usually, only 50% of the cost of a business meal is deductible. The Consolidated Appropriations Act of 2021 dispenses with the 50% limitation for 2021 and 2022.
The 100% deduction, however, only applies to business meals that are also "restaurant meals". Clearly, the purpose of this temporary provision is to assist the restaurant industry after the devastation wrought by COVID-19.
Taxpayers must still meet the documentation and business purpose requirements of prior law. In addition, they must come from a restaurant:
"The term 'restaurant' means a business that prepares and sells food or beverages to retail customers for immediate consumption, regardless of whether the food or beverages are consumed on the business’s premises. However, a restaurant does not include a business that
primarily sells pre-packaged food or beverages not for immediate consumption, such as
a grocery store; specialty food store; beer, wine, or liquor store; drug store; convenience
store; newsstand; or a vending machine or kiosk. (IRS Notice 2021-25)
Additionally, the following categories of "business meals" that previously were only 50% deductible are now, temporarily, 100% deductible:
Meal expenses paid for an employee while out of town on business, and,
Meals provided to employees for the employer's convenience on the employer's premises.
Meals consumed at employee holiday parties and employee outings continue to be 100% deductible.
Business should use separate general ledger accounts for keeping track of the 50% / 100% deductible expenses.
- Mark Gleason CPA