To help the COVID-19 ravaged restaurant industry, Congress is allowing a temporary 100% deduction for business meals provided by a restaurant. The term “restaurant” means 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. In the right hands this can be a powerful marketing tactic that benefits everyone involved with a 100% tax write-off. Please see below before overindulging.
It is worth repeating what constitutes a business meal. By definition, a business meal is an expense for food and/or beverages under one of two scenarios. The first situation is when a taxpayer or a taxpayer’s representative has a meal with a third party that has a business or potential business relationship with the taxpayer (i.e., customer, client, employee, vendor, or prospect). During the meal, a business discussion must take place regarding business between the taxpayer and the third party. The second situation is when the taxpayer or the taxpayer’s agent has a meal while away from home for business purposes. Away from home means that the taxpayer or taxpayer’s agent is traveling far enough away from their tax home to need sleep.
A common misconception is that a business meal includes a meal that a taxpayer has while out of the office on business. A meal for the taxpayer or agent in between running errands or business appointments does not constitute a business meal and is not deductible for income tax purposes.