For 2021 and 2022 only, businesses can usually deduct the full cost of business-related food and beverages that has been purchased from a restaurant. Otherwise, the limit is typically 50% of the cost of the meal.
To qualify for this enhanced deduction:
- The business owner or an employee of that business must be present when food or beverages are provided.
- Meals must be from restaurants. This includes businesses that prepare and sell food or beverages to retail customers for immediate consumption, on or off premises.
- Payment or billing for the food and beverages take place after December 31, 2020, and before January 1, 2023.
- The expense cannot be lavish or extravagant.
Other businesses that mostly sell pre-packaged goods not for immediate consumption like grocery stores, do not qualify. 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 may include taxes and tips.
- The cost of transportation to and from the meal does not count as part of the cost of a business meal.
Entertainment events
Business owners can deduct the costs of meals/beverages provided during an event if either of these apply:
- food and beverages is purchased separately from the entertainment
- the cost of the food and beverages is separate from the cost of the entertainment with proof of receipt
Businesses should review special recordkeeping rules that apply to business meals for more information.