Tax Deductibility of Business Meals
The “Taxpayer Certainty and Disaster Tax Relief Act of 2020” (the Act), enacted as a part of the “Consolidated Appropriations Act, 2021” (CAA 2021) allows for a full tax deduction for certain business meal expenses. This is an increase from the 50% deduction limit historically associated with deductions for business meals.
Congress had Restauranteurs on their mind when the Act and CAA 2021 were passed. To be eligible for the 100% deduction, the relevant food and beverages must be provided by a restaurant. Further, the 100% deductibility only applies to tax years 2021 and 2022. At the end of 2022, barring further legislation, the 50% deduction limit will go back into effect. Your office holiday party is still 100% tax deductible, provided the food and beverages were provided by a restaurant.
One final note: the Act and the CAA 2021 do not provide tax deductions for entertainment expenses. The “Tax Cuts and Jobs Act of 2017” (the TCJA) eliminated the 50% deduction for entertainment expenses (tickets to shows and sporting events, for example). What the TCJA took away, the Act and the CAA 2021 did not give back with respect to deducting your Steelers tickets. 😫
Here is a handy table detailing these important changes for your reference:
TAX DEDUCTIBILITY OF MEALS & ENTERTAINMENT EXPENSES
| Type of Expense | Rules prior to the Tax Cuts and Jobs Act of 2017 (Prior to 2018) |
Rules After Tax Cuts and Jobs Act
(2018,2019, 2020, and years after 2022) |
Consolidated Appropriations Act, 2021 changes for 2021 and 2022 Note: These are Special rules that apply only to 2021 and 2022 |
| Entertainment | 50% deductible | Nondeductible | Nondeductible |
| Business Meals (including meals during an entertainment event that are paid for separately) | 50% deductible | 50% deductible | 100% deductible if provided by a restaurant |
| Meals provided for the convenience of the employer | 100% deductible | 50% deductible | 100% deductible if provided by a restaurant |
| Employer parties for employees | 100% deductible | 100% deductible | 100% deductible if provided by a restaurant |
| Employee Meals While Out of Town for a Business Purpose | 50% deductible | 50% deductible | 100% deductible if provided by a restaurant |
