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Tax Blog

Some Business Meals May Be 100% Deductible Under Second COVID-19 Stimulus

Though corporate meal expenses are currently 50% deductible, the Trump administration reportedly inserted language in the relief bill bargaining process to make corporate meal expenses 100% deductible in an attempt to make the faltering restaurant industry that much more attractive to businesses eyeing power lunches and catered events.

The bill temporarily allows a 100% business expense deduction for meals (rather than the current 50%) as long as the expense is for food or beverages provided by a restaurant. This provision is effective for expenses incurred after Dec. 31, 2020, and expires at the end of 2022.

While it is too early to tell how successful the deduction will prove to be on a grand scale, it certainly cannot hurt restaurant owners. The industry as a whole suffered devasting damage as a result of governmental shutdowns, temporary suspension of indoor dining, and COVID-19. Yelp estimates that since March 1, 2020, approximately 61% of restaurants that have decided to shut their doors did so permanently.

In order to make sure that your business meal passes the muster of IRS scrutiny, the following standards should also be followed:

· The meal is not lavish/extravagant.

· A substantial business discussion took place before, during, or after the meal

· There was a business purpose for the meal.

· The cost of the meal was not included in an entertainment-type ticket.

· An owner of the business attended the meal.

Other office snacks, such as coffee, soft drinks, bottled water, or donuts, are still 50% deductible since they do not come from a restaurant. The same can be said for food/meals that are obtained on-site for the benefit of the Employer. If you have any questions about the deductibility of business meals or other common deductions, reach out to the professionals at The Center for Financial, Legal, and Tax Planning, Inc. at (618) 997-3436.


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