Celebrate with Free Meals!

100% Deductible: Restaurants and Restaurant Take-Out

What is a Restaurant? Does it include specialty food shops? Well, for purposes of claiming a business meal deduction, a restaurant is an establishment that prepares and sells food or beverages to retail customers for immediate consumption, whether the food or beverages are consumed on or off the restaurant’s premises.

The “Taxpayer Certainty and Disaster Relief Act of 2020” has a temporary exception to the 50% limit on the amount that businesses may deduct for food or beverages, allowing 100% deduction for food or beverages from restaurants. That’s right! Until January 1 of 2023, you can claim 100% of your business food or beverage restaurant expenses that means your meal is a FREE MEAL. Just make sure that you, the business owner, or an employee of your business is present when food or beverages are provided. 

Does this include restaurant take-out? Absolutely! Your restaurant take-out also gets a 100% deduction making the meal a FREE MEAL. Of course, this temporary exception applies if the expense is not lavish or exorbitant under the circumstances. What does that mean? Well, it means you can’t have your neighbor claim as your business expense the dinner party he threw for his in-laws at “Les Grand Lobster Restaurant,” or something like that.

Food and beverage expenses are 100% deductible, that a FREE MEAL provided they are given separately from entertainment activity and purchased separately from entertainment activities; or stated separately in an invoice, bill, or receipt.

50 % Deductible: Eating Facilities and Other Food Sources

What about all the other places you get your business meals? 

Food or beverages acquired from businesses that primarily sell prepackaged food or beverages not for immediate consumption are only 50% deductible—and only when the expenses meet the requirements for deductible food and beverage expenses.

No matter whether the eating facility is run by the employer directly, or by a third party with a contract with the employer, eating establishments on the employer’s property are treated as de minimis fringe benefits and are not considered restaurants. Additionally, even if a third party is running a specific employer-operated eating establishment under a contract with the employer, the employer may not treat those establishments as restaurants. What is this in straightforward terms? It’s a lot like something your grandma might have said: Don’t double dip and you’ll be fine.

Here’s a List of Common Food Sources That Are Not Restaurants:

X grocery stores

X specialty food stores

X beer, wine or liquor stores

X drugstores

X convenience stores

X newsstands

X vending machines or kiosks

Take advantage of these deductibles and let your employees know just how valuable they are while also availing of this tax break. It’s just smart business sense. There’s nothing like starting the new year with happy employees and a bank balance that will make you smile.