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What Business Meals are Now 100% Deductible per the IRS?

by Tracey Hrica, EA Apr 12, 2021 | Share

Are you confused about what rules currently apply to meals and entertainment expenses?

I don’t blame you. 

The tax treatment of these business-related expenses has had shifting requirements over the last few years.

The Consolidated Appropriations Act(CAA), which became law at the end of last year, included a taxpayer-friendly change in these requirements.

The law stated that you can write off 100% of the cost of business-related food and drinks provided by restaurants in 2021 and 2022. 

If you remember, the usual deduction for meals is generally 50%.

Well, the “provided by restaurants” language raised a lot of questions.

Does this apply to both sit-down meals and take-out?

Do bars that provide food count?

Food trucks?

Thankfully, the IRS released guidance last Thursday. Here goes:

  • “Restaurant” is defined as a business that prepares and sells food or beverages to retail customers for immediate consumption.
  • Sit-down, take-out, and delivery all apply for the 100% deduction.

Food purchased from a business that primarily sells prepackaged food or beverages does not qualify for the 100% deduction. This includes:

  • Grocery stores
  • Specialty food stores
  • Liquor stores
  • Drug stores
  • Convenience stores
  • Newsstands
  • Vending machines or Kiosks

The 50% limitation continues to apply to any business-related expense for food or beverages acquired from these types of businesses.

Here are a few reminders about meal deductions in general. Deductible items include:

  • Business meals shared with clients
  • Meals bought for business travel
  • Meals at conferences that aren’t included in the price of registration 
  • Meals for employees having to work late
  • Office snacks for the break room

Make sure to keep all receipts related to your meal expenses. It’s always a good idea to record the following information if it’s not included on a receipt:

  • Date of the meal
  • Total amount, including tax and tip
  • Name of the restaurant
  • Names of the people who attended the business meeting
  • Details of the business purpose and details discussed

While this latest bill’s intent is to help the restaurant industry during the pandemic, it might also provide tax relief for businesses.

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How to Expertly Manage Your Business’s Bookkeeping with Little to No Experience

 

About the Author

Tracey Hrica, EA

Tracey Hrica joined the firm in 1995 as a bookkeeper. In 2012, she earned the designation of Enrolled Agent(EA), which enables her to prepare personal and business tax returns and represent clients before the IRS. To maintain the designation of EA, she must complete yearly continuing education in the areas of personal and business taxation. Working closely with her clients, Tracey’s primary areas of concentration are new client onboarding, client communication, research, and QuickBooks support. As a QuickBooks ProAdvisor, she works closely with clients who rely on QuickBooks for the day to day running of their business. Tracey has expertise in both QuickBooks Desktop and QuickBooks Online.

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