Please note that I'm not an accountant nor a tax expert, but I feel that this information is important to share with anyone running a business.
The IRS has temporarily increased the tax deduction for many (but not all) business meal expenses from 50% to 100%.
This change applies to:
- business meal expenses from 1/1/2021 through 12/31/2022
- that are also from qualified restaurants.
The IRS defines a restaurant that qualifies for this 100% business deduction as one that prepares and sells food or beverages to retail customers for immediate consumption, either on or off the premises.
As far as I understand it, this includes the following types of business meals and vendors:
- dine-in from restaurants, cafes, coffee shops, pizza shops, bakeries, etc.,
- take out,
- delivered directly from a restaurant,
- and from restaurant meal delivery services, e.g., Doordash, Grubhub, Postmates, Uber Eats, etc.
A non-qualifying restaurant (for which business meal expenses will remain at the longstanding 50% deduction) sells pre-packaged food or beverages not for immediate consumption, including:
- grocery stores and markets, e.g., Star Market, Stop & Shop, Roche Brothers
- convenience stores, e.g., Store 24, 7-Eleven
- theater concession stands, e.g., Boston Symphony, Roxy Theatre
- vending machines or kiosks, e.g., Leanbox
- specialty food stores
- beer, wine, or liquor stores
- drug stores
- newsstands
The good news
- This will probably lower your federal taxes by increasing your deductible business expenses.
- Since Massachusetts automatically adopts federal changes to business meals and entertainment expenses, this will probably lower your state taxes as well.
For more information, see the IRS web page:
- https://www.irs.gov/newsroom/treasury-irs-provide-guidance-on-tax-relief-for-deductions-for-food-or-beverages-from-restaurants
or google: 100% restaurant deduction 2021
And, if you haven't already, I also suggest that you talk to your accountant soon about this (and the many other recent tax law changes) to find out how your personal and business taxes and deductions may be affected.
Martin Kadansky
Kadansky Consulting, Inc.
