(626) 858-2037

Secure Portal

Payroll Login
Tobi Li Marshall CPA, APC

Increased Business Meal Deductions for 2021 and 2022

Article Highlights:

  • Business Meals Under TCJA 
  • 100% Deduction for 2021 and 2022 
  • Qualifications 
If you recall, the Tax Cuts and Jobs Act (TCJA), effective beginning in 2018, eliminated the business-related deduction for entertainment, amusement or recreation expenses. However, it did retain a deduction for business meals when the expense is ordinary and necessary for carrying on the trade or business and is not lavish or extravagant, along with some other requirements noted below.

Under TCJA, the business-meal deduction continues to be 50% of the actual expense. Also remember that business meals must be documented, including the amount, business purpose, date, time, place and names of the guests as well as their business relationship with you.

Great News – For 2021 and 2022 only, the Taxpayer Certainty and Disaster Tax Relief Act of 2020 allows businesses to deduct 100% of business meal expenses under the following circumstances:
  • The food or beverages must be provided by a restaurant. The use of the word “by” (rather than “in”) a restaurant makes it clear that the new rule isn’t limited to meals eaten on the restaurant’s premises. Takeout and delivered meals provided by a restaurant are also fully deductible. 

  • The expense is an ordinary and necessary expense paid or incurred during the taxable year in carrying on any trade or business.* 

  • The expense is not lavish or extravagant under the circumstances.* 

  • The taxpayer or their employee is present at the furnishing of the food or beverages.* 

  • The food and beverages are provided to a current or potential business customer, client, consultant or similar business contact.* 

IRS regulations expand on the last requirement by explaining that to be deductible, the food or beverages must be provided to a “person with whom the taxpayer could reasonably expect to engage or deal in the active conduct of the taxpayer’s trade or business such as the taxpayer’s customer, client, supplier, employee, agent, partner, or professional adviser, whether established or prospective.”

Where food or beverages are provided at an entertainment activity, the food and beverage must be documented separately from the entertainment because entertainment is not deductible. Also, be cautious of the requirement that food or beverages be provided by a restaurant to be eligible for 100% deductibility pending IRS regulations defining what constitutes a restaurant.

*Meals and beverages not provided by a restaurant will be deductible but limited to a 50% deduction of the expense if otherwise meeting the qualifications of a business meal.

If you have questions about how this 100% meal deduction might apply to your business, please give this office a call.

Share this article...
Facebook
Twitter LinkedIn Pinterest Reddit Email

Want our best tax and accounting tips and insights delivered to your inbox?

Sign up for our newsletter.

I confirm this is a service inquiry and not an advertising message or solicitation. By clicking “Submit”, I acknowledge and agree to the creation of an account and to the and .

Privileged And Confidential
This communication and any accompanying documents are confidential and privileged. They are intended for the sole use of the addressee. If you receive this transmission in error, you are advised that any disclosure, copying, distribution, or the taking of any action in reliance upon this communication is strictly prohibited. Moreover, any such disclosure shall not compromise or waive the attorney-client, accountant-client, or other privileges as to this communication or otherwise. If you have received this communication in error, please contact me at the above email address. Thank you.

Disclaimer
Any accounting, business or tax advice contained in this communication, including attachments and enclosures, is not intended as a thorough, in-depth analysis of specific issues, nor a substitute for a formal opinion, nor is it sufficient to avoid tax-related penalties. If desired, Tobi Li Marshall CPA, APC would be pleased to perform the requisite research and provide you with a detailed written analysis. Such an engagement may be the subject of a separate engagement letter that would define the scope and limits of the desired consultation services.