TAX TIPS-Before January 1, 2023: Enhanced Meal Deduction Allows 100% Deduction of Meals!

For year 2021 and 2022 only, businesses can deduct 100 percent of business-related food and drink expenses from a restaurant. If it is not a restaurant, then the usual limit of 50 percent of the meal expense still applies.

            To Qualify for the 100% deductible “enhanced” business meals deduction,

a) the business owner or employee must be present when the meal is provided, and

b) the meal must be from restaurants.

The IRS states that this also includes businesses that prepare and sell food or beverages to retail customers for on-premises or off-premises consumption. This means that grocery stores or any store that sells prepackaged good not for immediate consumption will not qualify for use in the deduction. Lastly the expense can not be extreme or extravagant and is only applicable for meals purchased after December 31, 2020, and before January 1, 2023.

            It is important to note that the cost of a meal can include taxes and tips but cannot include the cost of transportation to and from the placed obtained.

            Also, if a business owner is at a business-related entertainment event in which the purchase of food or beverages is separate from the entertainment (entertainment is not tax deductible i.e., baseball tickets), then those meals are applicable for deduction.

If you would like to learn more or to set up a consultation call Marlies Y Hendricks CPA PLLC at either 716-694-3500 or 910-769-8730.

The above information is of a general nature only and should not be relied upon for specific situations.