Businesses can temporarily deduct 100% of business meals beginning January 1, 2021
Normally businesses are subject to a 50% limit on the amount that they may deduct for food or beverages consumed during business meetings.
Beginning January 1, 2021, through December 31, 2022, businesses can claim 100% of their food or beverage expenses paid to restaurants as long as the business owner (or an employee of the business) is present when food or beverages are provided and the expense is not lavish or extravagant under the circumstances.
Under the temporary provision, restaurants include businesses that prepare and sell food or beverages to retail customers for immediate on-premises and/or off-premises consumption. However, restaurants do not include businesses that primarily sell pre-packaged goods not for immediate consumption, such as grocery stores and convenience stores.
If business meals deductions are audited, the following documentation must be provided:
• Amount of each separate expenditure • Date and description of type of expense • Place of activity • Business purpose of activity, including a description of any business benefit derived or expected, and nature of any business discussion with person attending • Business relationship of persons attending, including name and affiliation.