Dining out is one of the simplest, most fulfilling pleasures in life. No dishes, no grocery shopping, no clean-up… and let’s be real, it likely tastes better than your own cooking. When you are running a business sometimes you straight up have no choice. No time to cook! Pick up food!
Well… I have some good news for YOU! Business meals are now 100% DEDUCTIBLE. Pre-panny, you were allowed to only deduct 50% of business meal expenses.
Wait… What? Let’s break this down.
First off, you can thank the ever-present panini for this enhanced tax write-off. Over the last year and half, restaurants have been going through the most. Many have failed. Those that are still operating are struggling to retain employees and bring in a constant flow of diners.
Because restaurants were hit hard by shelter-in-place rules, the IRS enacted a temporary exception to the 50% limitation for amounts paid or incurred after December 31, 2020, and before January 1, 2023, for food and beverage provided by a restaurant.
What that means is, eligible food and beverage expenses are fully tax-deductible through the end of 2022. Yep, that $100 lunch you had last week with your business colleague equals a $100 tax write-off.
(You can read & geek out to the formal tax language @ Journal of Accountancy… if you’re curious)
Which restaurants qualify?
We are talking about the IRS so you know there are exceptions to the rule. For your meals to be 100% deductible, the restaurant must prepare and sell food or beverages to customers for immediate consumption. The food or beverage does not need to be consumed at the restaurant. So go ahead and grab Sushi take-out for a lunch meeting that you have with your client at the local park.
Which restaurants don’t qualify?
Restaurants that primarily sell prepackaged food or beverages, not for immediate consumption, DO NOT qualify. So even though you and a client grab a couple fresh n ready hot dogs from the local convenience store, this does not qualify for 100% tax deduction under the temporary rules.
Why? Because the convenience store primarily sells prepackaged food and drinks; it is not a restaurant. In this case, the 50% limitation continues to apply.
What does this mean? What do you do with this?
Keep track of your business meals!
- Did you take that client call at your favorite sandwich shop?
- How about the breakfast you picked up for the team on your way to the office?
When you run a business and you have a team, meal costs can add up. Help yourself out by tracking these expenses so you can write it off come tax time!