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Business Meals Deduction for 2021 and 2022
By: Natalie Bruns, CPA, MBA- Manager
The IRS released Notice 2021-25 on April 8, which provides guidance on the temporary increase in the business-meal deduction from 50% to 100% for expenses paid or incurred after December 31, 2020, and before January 1, 2023.
Prior to December 31, 2020, all business meals were 50% deductible if they were not considered lavish or extravagant and the taxpayer or an employee of the taxpayer were present. The notice released in April provides a temporary exception to the 50% limitation, indicating business meals can now be deducted at 100% if the food or beverage was provided by a restaurant. In this context, a restaurant is any business that prepares and sells food or beverages to retail customers for immediate consumption. This does not include a business that sells pre-packaged food or beverages, such as a grocery store, convenience store, or vending machine. All other business meals that are not purchased from a restaurant are still deductible at 50%.
The guidance also specifies that any eating facility on the business premises that provides employee meals, or an employer-operated facility does not qualify as a restaurant for the purposes of the 100% deduction.
If you have questions regarding the deductibility of business meal expenses, please reach out to our team. Below is a link to the notice released by the IRS.