Businesses Can Temporarily Deduct 100% of Food or Beverage Expenses

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WASHINGTON, D.C — The Treasury Department and the Internal Revenue Service recently issued Notice 2021-25 providing guidance under the Taxpayer Certainty and Disaster Relief Act of 2020.

The Act added a temporary exception to the 50% limit on the amount that businesses may deduct for food or beverages. The temporary exception allows a 100% deduction for food or beverages from restaurants.

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 ) is present when food or beverages are provided and the expense is not lavish or extravagant under the circumstances.

Where can businesses get food and beverages and claim 100%?

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 grocery stores and convenience stores.

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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.

More information for businesses seeking coronavirus-related tax relief can be found at IRS.gov.

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