IRS Tax Update | Meal Deductions

As you may be aware, the IRS issued some new guidance about the deductibility of meals for your business.  Eating out benefits our local restaurants and you can now deduct 100%!  Please review the statement from the IRS below:

Businesses can temporarily deduct 100% beginning January 1, 2021

The Treasury Department and the Internal Revenue Service issued Notice 2021-25 PDF providing guidance under the Taxpayer Certainty and Disaster Relief Act of 2020. The Act added a temporary exception to the 50% limit on the amount that businesses may deduct for food or beverages. The temporary exception allows a 100% deduction for food or beverages from restaurants.

Beginning January 1, 2021, through December 31, 2022, businesses can claim 100% of their food or beverage expenses paid to restaurants as long as the business owner (or an employee of the business) is present when food or beverages are provided and the expense is not lavish or extravagant under the circumstances.

Where can businesses get food and beverages and claim 100%?

Under the temporary provision, restaurants include businesses that prepare and sell food or beverages to retail customers for immediate on-premises and/or off-premises consumption. However, restaurants do not include businesses that primarily sell pre-packaged goods, not for immediate consumption, such as grocery stores and convenience stores.

Additionally, an employer may not treat certain employer-operated eating facilities like restaurants, even if these facilities are operated by a third party under contract with the employer.

More information for businesses seeking coronavirus-related tax relief can be found at IRS.gov.

Thank you!

The Flexure Team