If you don't have an exception to apply, you have been subject to lawmakers limits on your tax deductions for business meals since 1986, for the first time, to 80%, now to 50%.
On December 27, 2020, however, lawmakers concluded to allow a new, interim 100% business meals allowance for 2021 and 2022 to assist the restaurant industry through the COVID-19 pandemic.
You have to get your food or drinks from a restaurant in order to meet the criteria for the 100% deduction.
The law requires only that the restaurant provide the food and beverages. You don’t have to pay the money directly to the restaurant. For example, you qualify for the 100 percent deduction if you order a restaurant meal that’s delivered by Uber Eats or Grubhub.
Your deductible business meals must be tax code Section 162 ordinary and necessary business expenses, and they must not be subject to disallowance under tax code Section 274.
You must be present at the business meal, and you must provide the business meal to a person with whom you could reasonably expect to engage or deal with in the active conduct of your business, such as a customer, client, supplier, employee, agent, partner, or professional advisor, whether established or prospective.
Remember, to qualify for the 100 percent deduction, you need a restaurant. The IRS has recently provided guidance on what is and is not a restaurant. Make sure you know these prior to trying this tax strategy!
In general, the 50 percent limitation applies to business meals from the sources listed above.
The restaurant creates the 100 percent deduction.
If you would like to discuss your business meal activities, please call me on my direct line at 262-358-8297.
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Spencer Accounting Group, LLC does not provide investment, tax, legal, or retirement advice or recommendations in these blogs. The information presented here is not specific to any individual's personal circumstances.
Keana Spencer is an Accountant, Entrepreneur, and Educator to her clients, with a strong passion. Keana has over 10 years of experience and through her practice, she is a source of knowledge and strategies to her clients.