Beginning January 1, 2021 through December 31, 2022, businesses can claim 100% of their food or beverage expenses paid to restaurants as long as the business owner, or an employee of the business, is present when food or beverages are provided and the expense is not lavish or extravagant under the circumstances.
The IRS issued Notice 2021-25 providing additional guidance under the Taxpayer Certainty and Disaster Relief Act of 2020 (Act) allowing businesses a 100% deduction for food or beverages from restaurants. Earlier in 2021, legislation increased the 50% deduction to 100%. There was a 50% limit on the amount that businesses can deduct for food and beverages.
The IRS is very specific about what is and is not covered. Under the temporary provision, restaurants include businesses that prepare and sell food or beverages to retail customers for immediate on-premises and/or off-premises consumption. However, restaurants do not include businesses that primarily sell pre-packaged goods not for immediate consumption, such as specialty food stores, grocery stores, beer, wine or liquor stores, drug stores, newsstands, convenience stores, vending machines, or kiosks.
Additionally, an employer may not treat certain employer-operated eating facilities as restaurants, even if these facilities are operated by a third party under contract with the employer.
Contact your accountant or CPA with questions.