Included within the Consolidated Appropriations Act, 2021, (CAA) was one important change, the temporary 100% meal deduction. Starting on January 1, 2021, through December 31, 2022, a business may claim as a deduction 100% of food or beverage expenses paid to restaurants. The provision requires that the business owner or an employee of the business be present during the meal. In addition, the expense cannot be lavish or extravagant under the circumstances. For all other entertainment and business meal expenses, the 50% meal deduction still applies.

Additional IRS Guidance:

  • Restaurant Definition – The guidance clarifies the term “restaurant” to be any business that prepares and sells food or beverages for immediate consumption, regardless of whether those items are consumed on-site. Thus, any qualifying purchases made at such establishments qualify for the 100% deduction. However, purchases made at any business which sells pre-packaged food or beverages such as convenience stores, specialty food stores, beer, wine or liquor stores, grocery stores, or vending machines do not qualify.
  • On-Site Eating Facilities – The guidance also provides clarification for eating facilities located on the business premises for the purpose of furnishing employee meals (excluded from employee gross income), or an employer operated eating facility, even if operated by a third party under contract with the employer, is not a qualifying restaurant for purposes of the expanded 100% meal deduction.

Still have questions? Contact ClarkSilva today to learn how you can increase your deductions and support your favorite restaurant!