Deanne Wilson
The Consolidated Appropriations Act, 2021 is a spending bill for the COVID-19 pandemic that is making impactful changes on the deductibility of business meals. Any meal expenses purchased from a restaurant after December 31, 2020 through December 31, 2022 are now 100% deductible. This provision was added to the bill with the aim to assist the struggling restaurant industry as a result of the pandemic.
It is important to note that this deduction is only applicable when the meals are provided by a restaurant and still does not apply to entertainment expenses, which may include tickets to sporting events or concerts.
However, any food or beverages including alcohol purchased for a client separately while entertaining is deductible. For example, if you attended a baseball game with a client the tickets would not be deductible, but a meal purchased while there, if paid separately, would qualify as deductible if receipts prove the cost was separate from the entertainment expense.
The one exception to entertainment expenses activities is for your own company/employee events such as holiday parties, firm outings, or team-building events. Because of the different applications of the tax bill, we recommend keeping separate accounts for employee functions, non-employee entertainment, and meal expenses.
Common examples of deductible meals include:
The other existing requirements for deductible meals still apply including:
- Meals cannot be lavish or extravagant for the circumstances.
- You or one of your employees must be present when food and beverages are served.
As always, it is important to keep record of your receipts, attendee’s names, business, and dates in the event of an audit from the IRS.
Please call if you have any questions regarding new meal deductible provisions.
