To qualify for the full deduction, the business owner or an employee on behalf of a business must be present when food or beverages are provided.
I know that 2022 is more than halfway over, but there’s still time for business owners to take advantage of a unique tax incentive that aims to revitalize the restaurant industry. For 2021 and 2022 only, businesses can deduct the full cost of business-related food and beverages purchased from a restaurant. The rule used to provide for a 50% deduction, and that’s likely what the deduction will return to after the end of 2022 unless the provision is extended.
To qualify for the full deduction, the business owner or an employee on behalf of a business must be present when food or beverages are provided. Also, the expense cannot be lavish or extravagant. Tips, fees, etc., are also included! For the purposes of the deduction, restaurants include businesses that prepare and sell food or beverages to retail customers for immediate on-premises or off-premises consumption. Therefore, it can be argued that the rule can apply to food trucks and pop up vendors as well as brick and mortar restaurants.
Obviously, the deduction is one that should be taken seriously, but it’s also something that businesses should consider with regards to their employees.
For this purpose, grocery stores, convenience stores and other businesses that primarily sell pre-packaged goods not for immediate consumption, do not qualify as restaurants. Additionally, an employer may not treat certain employer-operated eating facilities as restaurants, even if they are operated under contract by a third party. If a business owner or employee is taking a client out for a meal, they should make sure to record the name of the client and the nature of the business discussed. Obviously, the deduction is one that should be taken seriously, but it’s also something that businesses should consider with regards to their employees. It’s no secret that a free company lunch for employees can raise morale, so why not kill three (not two) birds with one stone? Make your employees happy, receive a tax deduction, and help revitalize the small business restaurant industry in your neighborhood.