The IRS has just released more information on what it takes to take a 100% meals expense deduction for your business. Prior to 2021, the meals deduction was 50% but for 2 years, 2021 and 2022, it is 100%.
First, the IRS defined what the term “restaurant” actually means. This is a business that prepares and sells food or beverages to retail customers for immediate consumption, even if the food or beverages ae not consumed on the business’s premises. That means “to go” orders would qualify for the 100% deduction.
However, the IRS then clarified that businesses that primarily sell prepackaged food or beverages would not be included. This could be food from a grocery story, specialty food store, liquor store, drug store, convenience store or vending machine.
Additionally, a business may not treat the following as a restaurant for the 100% deduction:
Any eating facility located on the employer’s business premises and used in furnishing meals excluded from an employee’s gross income, or
Any employer-operated eating facility treated as a de minimis fringe.
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