100% Deduction of Restaurant Meals

100% Deduction of Restaurant Meals


Historically, businesses were able to deduct 50% of the cost of business meals and beverages so long as the business owner and/or an employee were present at the meal. Meals and beverages are deductible in the case of business travel (i.e.: an owner/employee are out of town away from home overnight for business purposes) or if the meal is associated with a meeting between the owner/employee and a “business associate” (such as a customer, potential customer, vendor, supplier, advisor, etc.).

To generate spending at restaurants after coronavirus’ detrimental effect on restaurant operations, the Consolidate Appropriations Act of 2021 changed the deductibility percentage to 100% of meals provided by a restaurant during tax years 2021 and 2022. So, during 2021 and 2022 only, restaurant business meals are now 100% deductible instead of the normal 50%. This is true for meals and beverages consumed during business travel or at meetings with a business associate.

IRS Notice 2021-25 defines the term restaurant 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’s premises. Therefore, deductible business meals are not required to be consumed in a restaurant to be 100% deductible.

The same Notice states that pre-packaged food or beverages are not “restaurant meals.”  This includes meals provided by 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. Another exclusion from the definition of restaurant meals are meals provided by an eating facility located on premises of employer or operated by employer and excluded from income of employees. Non restaurant meals are still 50% deductible.

Thus, it is important to note if a meal is a restaurant meal to take advantage of the 100% deduction allowed. This should be noted on your receipt as well as in your company bookkeeping so that the full deduction is taken when appropriate. As a reminder, any meal deduction requires a receipt from the meal provider. A credit card statement showing the meal charge is not sufficient, the actual receipt is required. On the receipt you must write the name of any business associate present at the meal and the business discussed during the meal.  Meal deductions are almost always reviewed by the IRS during an audit and if you can’t produce a receipt with the required documentation of the business discussed during the meal, the deduction is automatically denied.