Date: April 24, 2021
Did you know that you can now deduct 100% of the cost of ‘restaurant meals’ for 2021 and 2022?
The Consolidated Appropriations Act (CAA, 2021) enacted a temporary exception to the 50% limitation for amounts paid or incurred after Dec. 31, 2020, and before Jan. 1, 2023, for food or beverages provided by a restaurant. This temporary 100% deduction was designed to help restaurants, many of which have been hard-hit by the COVID-19 pandemic.
That means that you can get a dollar-for-dollar deduction on your 2021 and 2022 tax returns for the money you spend at restaurants while doing business. But don’t get caught having to pay it all back if you do it incorrectly.
The keyword here is the term “restaurant” which means a business that prepares and sells food or beverages to retail customers for immediate consumption, regardless of whether the food or beverages are consumed on the business’s premises (Think GrubHub, DoorDash, UberEats). A “restaurant” does not include a business that primarily sells pre-packaged food or beverages that are not for immediate consumption, such as a grocery store; specialty food store; beer, wine, or liquor store; drug store; convenience store; newsstand; or a vending machine or kiosk.
Business meals are only 100% deductible when considered to be ‘ordinary and necessary in the course of business and are not lavish or extravagant in nature. Sorry everyone, no concerts, golf tournaments, or bars.
Another thing to keep in mind is substantiation – or documentation. You’d save yourself a lot of time and money if you do a thorough job of documenting the business purpose for every meal. I recommend ReceiptBank or Expensify to my clients and advise them to write out the business purpose and who was present on each receipt, snap a picture, and store it electronically. No more overflowing shoeboxes of old receipts from years ago, no more costly accounting cleanups, and no more fears of being audited.
If you’d like to discuss how this tax deduction can be leveraged in your own business click here to book a call with me.