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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%.
Here’s why.
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%.
Final Thoughts
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.