For years 2021 and 2022 only, businesses could temporarily deduct 100 percent of business-related food and drink expenses from a restaurant. For all other food and beverage expenses, the usual limit of 50 percent of the expense still applied.
To qualify for the 100% deductible “enhanced” business meals deduction,
a) the business owner or employee must have been present when the meal was provided, and
b) the meal must have been from a restaurant.
The IRS stated that this also included 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 goods not for immediate consumption will not qualify for use in the deduction. The expense could not be extreme or extravagant and was only applicable for meals purchased after December 31, 2020, and before January 1, 2023. The cost of the meal could include taxes and tips but could not include the cost of transportation to and from the places where the meals were obtained. Additionally, if a business owner was at a business-related entertainment event in which the purchase of food or beverages was separate from the entertainment (entertainment is not tax deductible i.e., baseball tickets), then those meals were eligible for a deduction.
Beginning January 1, 2023, these deductions have returned to 50 percent deductibility, as outlined under the Tax Cuts and Jobs Act (TCJA).
Contact your Bormel, Grice & Huyett representative for more information.