IRS Tax Tip: Here’s What Businesses Need to Know About the Enhanced Business Meal Deduction

The IRS encourages businesses to begin planning now to take advantage of tax benefits available to them when they file their 2022 federal income tax return. This includes the enhanced business meal deduction.

For 2021 and 2022 only, businesses can generally deduct the full cost of business-related food and beverages purchased from a restaurant. Otherwise, the limit is usually 50% of the cost of the meal.

To qualify for the enhanced deduction:

  • The business owner or an employee of the business must be present when food or beverages are provided.
  • Meals must be from restaurants, which includes businesses that prepare and sell food or beverages to retail customers for immediate on-premises or off-premises consumption.
  • Payment or billing for the food and beverages occurs after December 31, 2020, and before January 1, 2023.
  • The expense cannot be lavish or extravagant.

Grocery stores, convenience stores and other businesses that mostly sell pre-packaged goods not for immediate consumption, do not qualify as restaurants. ¬

Employers may not treat certain employer-operated eating facilities as restaurants, even if they operate under contract by a third party.

Here’s what business owners need to know about certain costs:

  • The cost of the meal can include taxes and tips.
  • The cost of transportation to and from the meal isn’t part of the cost of a business meal.

Entertainment events
Business owners may be able to deduct the costs of meals and beverages provided during an entertainment event if either of these apply:

  • the purchase of the food and beverages occurs separately from the entertainment
  • the cost of the food and beverages is separate from the cost of the entertainment on one or more bills, invoices, or receipts.

Businesses should review the special recordkeeping rules that apply to business meals.

More information:
Publication 463, Travel, Gift, and Car Expenses

https://go.usa.gov/xJ5vr

Want important updates direct to your inbox?
Yes, please! New and timely information to keep you informed about tax, financial strategy, and business. 
Thank you for subscribing!

You may also be interested in

Six tax issues to consider if you’re getting divorced

Divorce entails difficult personal issues, and taxes are probably the farthest thing from your mind. However, several tax concerns may need to be addressed to ensure that taxes are kept to a minimum and that important tax-related decisions are properly made. Here are...

read more
Be aware of the tax consequences of selling business property

Be aware of the tax consequences of selling business property

If you’re selling property used in your trade or business, you should understand the tax implications. There are many complex rules that can potentially apply. To simplify this discussion, let’s assume that the property you want to sell is land or depreciable property...

read more

Empowering entrepreneurs to grow their business.

Download your free guide today, and get back in the driver’s seat of your business and your life.

Entrepreneurial Success Formula: How to Avoid Managing Your Business From Your Bank Account