Certain Meals Qualify for 100% Deduction for 2021 and 2022 Tax Years

To assist restaurants impacted by the COVID-19 pandemic, Congress enacted a temporary change to the 50% deduction limitation for food or beverages provided by a restaurant.

The temporary 100% deduction applies to expenses paid or incurred from January 1, 2021 until December 31, 2022.

In order to claim the 100% deduction, certain conditions must be met:

• The food or beverages must be purchased through a restaurant
– Businesses that primarily sell pre-packaged food or beverages not for immediate consumption do not qualify (this includes grocery stores, convenience stores, and other similar establishments)

• The business owner or an employee of the business must be present when the food or beverages are provided

• The expense may not be lavish or extravagant under the circumstances

Additional information regarding what is considered to be a restaurant as well as exclusions related to employer operated eating facilities and eating facilities on an employer’s premises can be found in Notice 2021-25.

The IRS has not released any guidance on how the temporary 100% deduction applies to per diems paid to employees. A per diem paid without additional substantiation should remain subject to the 50% disallowance.

If you have additional questions, please reach out to your Wilkins Miller advisor.