Good news! Food and beverages are still 100% deductible expenses in 2021 and 2022. This temporary deduction was designed to help the hard-hit restaurant industry recover from COVID-19 pandemic closures.
But like all things IRS, there are caveats. Entertainment expenses, like tickets to a show or sporting event, are still non-deductible. Also gone are charitable deductions for ticket purchases to a college’s athletic events, but you can deduct the meals consumed at these events if you separate the receipts.
Team-building outings, including the purchase of tickets for your staff, are allowed and 100% deductible. The tax code states that “expenses for recreational, social, or similar activities (including facilities therefore) primarily for the benefit of employees” qualify for the 100% deduction.
High-end restaurants and beverages, including alcohol, do qualify for the 100% deduction for business purposes. De minimis fringe benefits like in-office coffee and snacks do not fall into the category of meals and are still only 50% deductible.
That said, if you have expenses abnormally higher than last year, this could trigger a red flag. Although your tax preparer may not need a copy of your dinner receipt, the IRS states that you must keep a record of your receipts and document the attendee’s names, business, and dates in case of an audit. You’ve been warned.
Still, for businesses both small and large, the 100% food deduction is a great reminder that’s we are back to in-person networking and events. And that’s good news, too!