100% Deduction for Eating Out for 2021 & 2022

UPDATE - The 100% deduction on business meals ended on 12/31/2022 and has not been extended by Congress.

Since the mid-80s, deductions for business meals have been limited to 50% of your costs in an effort to limit the three-martini lunch of the 60s. More recently, the rules around business meals have been constantly changing with the TCJA in 2017 and temporary changes in the CAA passed in late 2020. Here is a quick summary of the rules for 2021-2022 and how you can maximize your meals deduction:

- Meals/Food on premises for the convenience of the employer (coffees for morning meetings, pizza for lunch meetings, snacks in the pantry, etc.) are deductible at 50%. UNLESS, they are take-out from a restaurant, then they are 100% deductible (but only until 12/31/2022). Please remember that if you are just buying the staff smoothies and coffees to be nice, that is considered compensation and will need to be added to their taxable wages so plan staff meals around meetings.

- Business meals are meals with an employee or business associate where the purpose of the meal is a business discussion. These costs have generally been deductible at 50% but are 100% deductible if provided by a restaurant for 2021 & 2022 in an effort to get people to spend at restaurants.

- Travel meals are meals during business travel. Business travel does not include your commute to work but traveling to CE and/or staff retreats. As above, these costs are deductible at 50% unless take-out or dine-in from a restaurant during 2021-2022.

For ALL the above, meal deductions are an audit red flag and need support. Any deduction without support will be reversed by the IRS. Meal receipts should be provided that include:

- Date (easy, it is on the receipt)

- Costs (ensure that you keep the final receipt with tip amount)

- Business Purpose (quick notation on the receipt noting why you were meeting together)

- Who was there (quick notation on the receipt noting who you were dining with)

As always, please contact us if you have questions.