Angela Tang, CPA
Estate & Trust Supervisor
The cost of business meals were considered a deductible expense since 1986, the problem is only 50% of such costs were allowed as a deduction until now. The latest 2020 stimulus bill saw many changes and one of the which is the business meal deduction. A temporary exception for 2021-2022 is the 100% business meal deduction for meals “provided by a restaurant.” The government is attempting to help the restaurant industry impacted by the Covid-19 shutdown by intentionally incentivizing business owners to patronize restaurants.
In order to qualify for the business meal deduction, there must be a business purpose for the meal and it is applicable whether it is dine-in at a restaurant or order for takeout. The following points are what qualifies for a business meal deduction:
- The business owner or employee must be present
- The cost of the meal or beverages must not be lavish or extravagant
- The meal is with a business associate (i.e. customer, vendor, employee, or consultant)
- The meal is ordinary and necessary for business purpose
And here is what qualifies for the temporary 100% business meal deductions:
- Meals for employees at the office provided by a restaurant
- Meals as part of social events such as holiday parties, company picnics, social activities, etc.
- Meals provided by a restaurant with business associates
- Meals purchased during an entertainment event if it is specifically broken down on a receipt and is provided by a restaurant
- Meals provided to public at events to promote goodwill in the community (i.e. sponsoring a community event or an open house)
- Meals that are an essential part of your business function (i.e. food blogger or restaurant critic)
For purpose of qualifying for the 100% business meal deductions, takeout or food delivery service with DoorDash, Grubhub , UberEATS, or other food delivery apps as well as catering companies are considered as “provided by a restaurant.” Keep in mind that the cost of entertainment, even if associated with a business activity, is still not deductible per the IRS. If you have any questions or would like to discuss the content of this article, please do not hesitate to contact one of our WFY advisors.