IRS Guidance on the 100% Business Meal Deduction
October 5, 2021
2021 and 2022
Generally, otherwise allowable business meal expenses are only 50% deductible. But legislation passed in 2020 temporarily lifted the 50% limitation. Now, businesses can deduct 100% of the cost of food or beverages “provided by a restaurant” in 2021 and 2022.
In Notice 2021-25, the IRS provided some guidance on when the 100% deduction is available.
According to the IRS:
- “Restaurant” is defined as a business “that prepares and sells food or beverages to retail customers for immediate consumption,” whether or not they’re consumed on the premises.
- “Restaurant” doesn’t include businesses that primarily sell pre-packaged food or beverages not for immediate consumption — such as grocery stores, specialty food stores, liquor stores, drug stores, convenience stores, newsstands, vending machines or kiosks.
- For purposes of the 100% deduction, employers may not treat the following as a restaurant: 1) any eating facility located on the employer’s premises that provides meals that are excluded from employees’ income as “furnished for the convenience of the employer,” and 2) any employer-operated eating facility treated as a de minimis tax-free fringe benefit, even if it’s operated by a third party under contract with the employer.
This material is generic in nature. Before relying on the material in any important matter, users should note date of publication and carefully evaluate its accuracy, currency, completeness, and relevance for their purposes, and should obtain any appropriate professional advice relevant to their particular circumstances.
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