Updated Business Meals and Entertainment Guidance
The tax treatment of business meals and entertainment expenses has changed significantly in recent years. Following the Tax Cuts and Jobs Act of 2017, the deduction for most food and beverage business expenses was limited to 50%. However, the Taxpayer Certainty and Disaster Relief Act of 2020 allowed for food and beverage business expenses incurred in 2021 and 2022 to qualify for a 100% deduction when purchased from a restaurant. For this purpose, a restaurant is 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. A restaurant does not include a business that primarily sells pre-packaged food or beverages not for immediate consumption, such as a grocery store; specialty food store; beer, wine, or liquor store; drug store; convenience store; newsstand; or a vending machine or kiosk.
For bookkeeping purposes for the 2021 and 2022 tax years, it would be beneficial for taxpayers to separately track their entertainment expenses (which will be nondeductible); their food and beverage expenses entitled to a 50% deduction; and the food and beverage expenses entitled to a 100% deduction. To assist in determining the deductibility of these expenses, please consult KSM’s reference chart on the tax treatment of business meals and entertainment expenses.
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