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Many business people don’t realize the tax benefits they’re passing up when they don’t take a deduction for 100% of their business meals, thanks to the new IRS rules.
Thanks to COVID, for the calendar years 2021 and 2022, most business meals can be deducted at 100% versus 50%. Of course, there are rules and exclusions. Keep reading to learn more about it.
Deducting Business Meals at 100%
Any business meal you have that counts as a meal from a restaurant or facility that serves food and beverages meant for immediate consumption may count as a business meal with a 100% deduction.
Here’s the criteria:
- A restaurant must provide the food and drink. In other words, a grocery store, convenience store, or anywhere else that sells prepackaged food not meant for immediate consumption doesn’t count.
- You can pay either the restaurant or a third party, like Uber Eats or DoorDash for the food. As long as it comes from a restaurant and not a store, it counts.
- You must have the meal with the person you bought it for, and it must be someone you do business with, want to do business with, or is a supplier or vendor. In other words, you must have a vested interest in the other party in a business sense.
- You can buy the food for yourself – you don’t have to be entertaining a client or other business professional. For example, if you are out of town, staying at a hotel and you eat breakfast out every morning, you can deduct it at 100% because it’s expected that you’ll eat breakfast out while away from home.
Deduction Meals at 50%
Certain meals still qualify only for the 50% deduction. These meals are those purchased at a facility meant for consumption later, such as a grocery store, liquor store, or convenience store. Even if you buy a sandwich (ready to eat) at a local drugstore for example, you can only deduct it at 50%, not 100%.
The IRS is trying to boost business for restaurants since they suffered so much during COVID. If you eat in a restaurant, order from a restaurant, or buy food from a restaurant within an entertainment facility, such as a ballpark, it counts as restaurant food and you can deduct the cost at 100%.
If you weren’t aware of this little IRS trick, you could be throwing money out the window. What other deductions, might you be missing?
Contact us today at 714-383-2307 to set up your consultation so we can get you back on track.