Business Meals Deductions
Recent tax law changes provide a 100% deduction for meals and beverages provided by a restaurant during 2021 and 2022. A "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 restaurant's premises. A restaurant does not include a business that primarily sells prepackaged food or beverages such as a grocery store, liquor store, drugstore, convenience store or specialty food store.
Remember the following when determining whether the 100% meals deduction applies:
Business meals that don’t qualify for the 100% deduction, such as those purchased from a grocery store, can still qualify for the 50% deduction;
The 100% meals deduction applies to amounts paid or incurred after December 31, 2020, and before January 1, 2023 — in other words, we look to the date of the meal, not the tax year of the business claiming the deduction. This means for fiscal year entities, this could affect more than two tax years.
We suggest creating separate Meals Expense accounts for 100% deductible expenses vs. 50% deductible expenses to make it easier to calculate your meals expense for your tax return.