You may have heard the recent stimulus legislation included removing the 50% limit on deducting business meals provided by restaurants in 2021 and 2022 and makes those meals 100% deductible.
In general, ordinary and necessary food and beverage expenses of operating your business are deductible. However, the deduction is generally limited to 50% of the otherwise allowable expense.
The new legislation adds an exception to the 50% limit for food or beverages provided by a restaurant in calendar years 2021 and 2022.
The use of “by” rather than “in” a restaurant clarifies the new rule is not limited to only meals eaten on the restaurant’s premises. Takeout and delivery meals are also 100% deductible.
Besides lifting the 50% limit for restaurant meals, the legislation does not change the requirements for deducting business meals. The following continue to apply to be deductible:
- The food and beverages can’t be lavish or extravagant under the circumstances.
- You or one of your employees must be present when the food or beverages are served.
- The meal must be for a current or prospective customer, client, supplier, employee, agent, partner, or professional adviser with whom you could reasonably expect to engage or deal in your business.
During an entertainment activity, food or beverages must be purchased separately from the entertainment, or their cost must be listed individually on the bill, invoice, or receipt. Unlike food and beverages, entertainment expenses continue to be nondeductible.
