Business meal deductibility improves under the Bipartisan Coronavirus Relief Bill

While the economic stimulus checks and the second round of the Paycheck Protection Program received most of the news coverage from the recently passed Consolidated Appropriations Act (CAA), there has not been much focus on changes to the deductibility of business meals.

It is no secret that restaurant owners across the nation have had more than their fair share of uncertainty and financial pressures during this pandemic.  To assist in enticing more patrons to support restaurants the CAA allows for a bigger incentive to all businesses that dine in or order take-out from restaurants.

The CAA has directed the Internal Review Service (IRS) to allow for a 100% deduction for all business owners when incurring meal costs from restaurants for tax years 2021 and 2022.  Before 2021, the deduction was limited to 50% of the business meal cost.

As we know, nothing is clear in tax law.  So, the question begs itself, what is the definition of a restaurant, right?  Does the definition cover meals from a food truck?  From a grocery store? A bakery? Or even a catering business?  Well, the legislation does not specifically answer these questions.  These questions will need to be answered in the future with IRS regulations or interpretations.

We do know under current IRS regulations what qualifies as a business meal:

• Business meeting while dining
• Business travel meals
• Group staff meetings with food (i.e., in-house meetings)
• Food in the office (i.e., breakroom)

So, for bookkeeping purposes, continue to track meal costs separate from entertainment expenses as much as possible to make year-end tax compliance simpler for you and your tax practitioner. 

Should you have any questions about this article, please contact your tax advisor at Greenwalt CPAs, Inc.