As you may recall, the Tax Cuts and Jobs Act (TCJA) of 2017 eliminated deductions for business entertainment expenses and reduced the deductible amount for certain types of business meals to 50%.
The Consolidated Appropriations Act signed into law on December 27, 2020, however, reversed some of this and allowed for a temporary full deduction of certain business meals through 2022.
Congress included this provision to help spur businesses to buy meals, ultimately helping our nation’s restaurant industry. Here are the details you need to know.
What Type of Meals Qualify for the Increased Deduction?
Current law allows a full deduction for “food and beverages provided by a restaurant.” Besides being provided by a restaurant, the meal must also meet the following three requirements to qualify for the increased deduction.
- The expense is not lavish under the circumstances.
- The taxpayer or an employee of the taxpayer must be present.
- The meals must be provided to the taxpayer or a business associate of the taxpayer.
Need Some Examples?
Some common examples of expenses that are 100% deductible through the end of 2022 if purchased from a restaurant are:
- Meals provided for employees working late
- Employee meals during travel, including per diem
- Food and drinks associated with networking events
- Treating a few employees to a meal
- Meals at seminars/conferences
- Meals with clients where work is discussed
How Should You Account for These Meals?
It is essential for businesses to account for meals and entertainment expenses separately in their chart of accounts during this time. Because entertainment expenses are still non-deductible, it will be beneficial to separate these expenses from your business meal expenses, as they are often mixed together. This will make it easier to identify what is and what is not deductible when the time comes to do your taxes.
So, what are you waiting for? Go out to eat and enjoy the increased deduction while helping to revitalize the restaurant industry! We have plenty of foodies here at MGA, so if you need any recommendations, feel free to reach out.
If you have any questions or concerns, please don’t hesitate to reach out to your team at MGA.
We are here to make the complex simple.
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