Tax guidance to know as you return to business dining

By Brian Ravencraft

Slowly but surely, we are seeing business owners return to entertaining clients and important contacts. With the return of sharing meals and outings, comes the need to be aware of the tax guidelines that come along with it. Let’s look at the most recent guidance. 

The IRS released Notice 2021-25 on April 8, which provides guidance on the temporary increase in the business-meal deduction from 50% to 100% for expenses paid or incurred after Dec. 31, 2020, and before Jan. 1, 2023.

Prior to Dec. 31, 2020, all business meals were 50% deductible if they were not considered lavish or extravagant and the taxpayer or an employee of the taxpayer were present. The notice released in April provides a temporary exception to the 50% limitation, indicating business meals can now be deducted at 100% if the food or beverage was provided by a restaurant. In this context, a restaurant is any business that prepares and sells food or beverages to retail customers for immediate consumption. This does not include a business that sells pre-packaged food or beverages, such as a grocery store, convenience store, or vending machine. All other business meals that are not purchased from a restaurant are still deductible at 50%.

The guidance also specifies that any eating facility on the business premises that provides employee meals, or an employer-operated facility does not qualify as a restaurant for the purposes of the 100% deduction.

If you have questions regarding the deductibility of business meal expenses, please reach out to me, I am always here to help. A quick visit to the IRS website may also give you some of the answers you are looking for. 

Brian E. Ravencraft, CPA, CGMA is a Principal with Holbrook & Manter, CPAs. Brian has been with Holbrook & Manter since 1995, primarily focusing on the areas of Tax Consulting and Management Advisory Services within several firm service areas, focusing on agri-business and closely held businesses and their owners. Holbrook & Manter is a professional services firm founded in 1919 and we are unique in that we offer the resources of a large firm without compromising the focused and responsive personal attention that each client deserves. You can reach Brian through www.agribusinessaccounting.com or www.HolbrookManter.com.