Lunch Anyone? It's 100% deductible now!

Over the holidays, the Taxpayer Certainty and Disaster Tax Relief Act of 2020was signed and with it came additional help to business owners. One of the more surprising points of the Act is the business meal deduction.

Under the Tax Cuts and Jobs Act beginning 2018, business meal deductions were only allowed 50% of the actual expense. (A business meal has to be “ordinary” and “necessary” for carrying on the trade or business, and it must be documented with date, time, amount, purpose of the meal, and names of guests.) Now, for 2021 and 2022, the new Act allows businesses to deduct 100% of business meal expenses.

Now, there are some rules that go along with this… the same need for the meal to be “ordinary” and “necessary” for carrying on your trade or business needs to apply. Also, it cannot be “lavish” or “extravagant” under the circumstances and you still need to carefully document everything for tax purposes. The food or beverages must be provided by a restaurant. The rule does say “by”, which professionals are taking to mean the meals do not have to be eaten in the restaurant- that a carry-out order or delivery apply as well. A qualifying meal could be perhaps a business meeting while dining, (which is what most of us think of,) traveling for business, (anything outside your normal commute), and staff meetings where there is food. (Always a good idea, in my opinion!)

There is definitely some debate about whether or not this perk for businesses will actually help the struggling restaurant industry, which is the original reason the rule was added to the new legislation. However, if you are an owner who frequently dines with clients or someone who loves to spoil their employees with weekly lunches from a great place in the neighborhood, it is a little bit of good news to begin the new year.

Please PLEASE consult your tax professional for the full details of the new Taxpayer Certainty and Disaster Tax Relief Act of 2020 to make sure your business is getting all the benefits you are entitled to.