If you have meal expenses as a part of doing business, we have good news: Those lunch meetings may now be 100% deductible on your company's tax returns for the next couple of years.
The IRS has always allowed businesses to deduct certain meal expenses. Often, treating clients (or prospective clients) to a meal at a restaurant is a part of doing business and, therefore, qualifies as a business expense. Typically, meals purchased for a client would be 50% deductible. But now, you may be able to deduct 100% of those meal expenses, provided that the proper conditions are met.
The Consolidated Appropriations Act
This deduction increase comes through the Consolidated Appropriations Act, which was passed earlier in 2021. The act allows for this increased deduction on qualifying business meal expenses incurred between January 1, 2021, and December 31, 2022. The business owner or an employee must be present at the time the cost is incurred, and the expense cannot be considered extravagant or lavish under the circumstances.
Deduction for Restaurants Only
The 100% business meal deduction is only applicable for meals purchased at a restaurant. Under the IRS’s definition, this is any business location that prepares food for immediate consumption, though you are not necessarily required to eat the meal at the location for the deduction to apply. The deduction does not apply at any location that primarily serves prepackaged food or beverages that are not intended for immediate consumption. This would include grocery stores, specialty food stores, liquor stores, vending machines, kiosks, and convenience stores.
Restaurant Cannot Be Tied to Business
The expense also cannot be connected to your own business in any way. The restaurant cannot be on the business’s premises, nor cannot it be operated by your business. Restaurants operated by a third party under contract with you or your company also would not qualify for this deduction.
If you have any questions regarding this increased business meal deduction, please reach out to us at Peacock & French today. We can help you to determine what expenses qualify while assisting your business with further business tax planning services. Call for an appointment today.