On April 8, the
IRS released Notice 2021-25, which provided guidance in determining which meals may be fully deductible under the new IRS rules and which are remain subject to the fifty (50%) percent limitation. Under long-standing IRS rules, the deduction for food or beverage expenses is generally limited to fifty (50%) percent of the amount. In order to be deductible as a business meal, the food must not be lavish or extravagant or the taxpayer (or an employee of the taxpayer) must be present at the furnishing of such food or beverages.
The
Consolidated Appropriations Act of 2021, expanded the deduction of business meals to one hundred (100%) percent, if the food or beverages for the meal are provided by a restaurant. This expanded deduction is only allowable for amounts paid or incurred during the calendar years 2021 and 2022. The term “restaurant” is defined as “a business that prepares and sells food or beverages to retail customers for immediate consumption, regardless of whether the food or beverages are consumed on the business’ premises.” The notice also clarified whether certain employer-provided meals would qualify as restaurants under the regulations.
