At the end of 2020 the stimulus legislation passed a provision that removes the 50% limit on deducting business meals provided by restaurants in 2021 and 2022 making those meals fully deductible.
Food and Beverage Expense
In general, the ordinary and necessary food and beverage expenses of operating your business are deductible. However, the deduction is limited to 50%. The new legislation adds an exception to the 50% limit for expenses for food or beverages provided by a restaurant. This rule applies to expenses paid or incurred in calendar years 2021 and 2022. Takeout and delivery meals provided by a restaurant are also fully deductible.
Deducting Business Meals
It’s important to note that other than lifting the 50% limit for restaurant meals, the legislation doesn’t change the rules for deducting business meals. All the other existing requirements continue to apply.
- The food and beverages cannot be lavish or extravagant under the circumstances
- You or one of your employees must be present when the food or beverages are served
- The food or beverages must be provided to you or to a “business associate”
A “business associate” is defined as a current or prospective customer, client, supplier, employee, agent, partner, or professional adviser with whom you could reasonably expect to engage or deal in your business.
Food or Beverages Provided at Entertainment Activities
If food or beverages are provided at an entertainment activity either they must be purchased separately from the entertainment or their cost must be stated on a separate bill, invoice, or receipt. This is required because the entertainment, unlike the food and beverages, is nondeductible.
Please contact EWH for more information about deducting business meals or any other questions you have regarding taxes or your business. You can also visit our tax center for resources for your taxes, and maximizing your deductions.
