Business Meal Deduction Changes from the Consolidated Appropriations Act
The Consolidated Appropriations Act was signed into law on December 27, 2020. It includes a temporary provision that allows businesses to write off 100 percent of business meals from January 1, 2021 through December 31, 2022.
This is an increase from the 50 percent deduction that applied for 2020 and earlier years.
It is important to note that other than lifting the 50 percent limitation on deductions for meal expenses, this legislation doesn’t amend any of the other rules related to business meal deductions. Therefore, to be deductible:
Business meals should still have a business purpose and involve dining with current or prospective customers, clients, suppliers, employees, partners, or professional advisors.
The food and beverages should not be lavish or extravagant under the circumstances.
You or one of your employees must be present when the food or beverages are served.
Although meals are 100 percent deductible, entertainment expenses are still disallowed. So, taking a client out for dinner is tax deductible, but the cost of a baseball game after dinner is not.
Further, if an entertainment event includes food and beverages, they must either be purchased separately from the entertainment or broken out on a separate invoice or receipt. If you haven’t done this already, make sure you update your chart of accounts to make an account for meals and separate one for entertainment.