On December 27, 2020, the President signed into law The Consolidated Appropriations Act, 2021, which is made up of the omnibus spending bill for the 2021 federal fiscal year and also $900 billion of stimulus relief for the COVID-19 pandemic in the United States. According to Section 210 of the stimulus relief package, there will be a “temporary allowance of full deduction for business meals.”
The Act has been modified to allow for full expensing (100%) of “restaurant” meals purchased in 2021 and 2022 provided the other requirements for deductibility are met (that is: not lavish, the taxpayer is present, as is an employee or business associate, etc.). Business-meal deduction only applies to activities "directly related to the active conduct of a trade or business or incurred immediately before or after a substantial and bona fide business discussion."
This is a direct effort to encourage more business meals in 2021 and 2022 to help the restaurant industry, as well as simply increasing business-expense deductions across all businesses. Entertainment expenses, however, will continue to not be deductible as outlined in the 2017 Tax Cuts and Jobs Act, so separating these accounts in your trial balance is prudent.
For further clarification on the deductibility of business-meals or any other tax provisions outlined in the stimulus relief act, please do not hesitate to contact one of our experienced professionals at Bormel, Grice & Huyett, 410-792-7259.
Below is the link to The Consolidated Appropriations Act, 2021: