Under Notice 2021-25, the IRS introduced a temporary 100% deduction for expensing business meals purchased from qualifying restaurants after December 31, 2020, and before January 1, 2023. However, certain meal expenses continue to only be 50% deductible.
For this purpose, 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.
What meal expenses are only 50% deductible?
- Food and beverages not for immediate consumption, including those products purchased from grocery, specialty food, beer, wine, or liquor stores, pharmacies, drug stores, convenience stores, newsstands, vending machines, or kiosks.
- Meals provided at eating facilities located on the employer’s business premises which are used in furnishing meals excluded from an employee’s gross income.
- Meals provided at employer-operated eating facilities which are treated as a de minimis fringe under Sec. 132(e)(2), even if that eating facility is operated by a third party under contract with the employer as described in Sec. 1.132-7(a)(3).
Where to enter meal expenses?
To enter meal expenses within the program, go to:
- Profit or Loss from Business (Schedule C)
- General Expenses
What were the meal deductions prior to Notice 2021-25?
Prior to Notice 2021-25, 50% or 80% of meals could be deducted.
Most people were able to claim 50% of their business meals as a deduction on their Schedule C.
Department of Transportation Employees that were subject to hours of service limits were able to claim 80% of their meal expenses for the time those limits were imposed on them.