In an effort to stave off the eradication of our restaurant industry, Congress passed the Consolidated Appropriations Act (PL 116-260).    And, what are those provisions?

Any expenses paid or incurred (note that means if you pay the credit card bill AFTER you used the card) for food or beverages that were supplied by a restaurant after 31 December 2020 (in other words, beginning 1 January 2021) through the end of 2022 (the provision expires on 1 January 2023) will be FULLY deductible.  Not 50%- but 100% deductible.

The goal is to incentivize we business folks to patronize restaurants.  Because now we no longer split the cost of the meals or beverages with the Feds, but get to deduct 100% of what we spend.

That’s a pretty nifty deal for us- and an even better one for restaurant owners.

But, don’t get too greedy.  Do not forget that the Tax Cut and Jobs Act (TCJA) outlawed all expenses that were amusement, recreation, or entertainment for those items paid or incurred after 31 December 2017.    This means we must separate out the costs of entertainment from the costs of the meals.

In addition, this means that dues, fees, costs for which we pay a social, athletic, or sporting club (or any organization connected with said activities) are not deductible tax expenses.  So, no Phillies games.  No rounds of golf.

But, if we bought food and beverages- and they are SEPARATELY billed and paid from the cost of the entertainment (in other words, going to a gala that costs $ 400 that includes the event and the food is NOT deductible; going to a Phillies game where the two tickets cost $ 75, but we bought food and beverages for $ 75 means we can deduct the $ 75 just for the food/beverage component)- those food and beverages (at least until 2023) are 100% deductible; no deduction exists for the baseball tickets.  (After that 2023 deadline, one presumes the 50% meal deduction once again takes hold.)

What about travel-related meals?   Those – unless they are purchased from a restaurant- would be 50% deductible.  If we purchased those items from a restaurant in 2021 or 2022, they would be 100% deductible.

Now, if we schedule an event for our employees- for THEIR benefit- even if that were to be recreational, social, or the like- the food/beverage portion is 50% deductible.  (Unless of course, the food/beverage components were obtained from a restaurant.  Then, the food is 100% deductible, if incurred over the next two years or so.)   This provision does not apply if an employee owner (>10% of the corporate vehicle), a family member of said employee owner, or the employee is highly compensated.

So, go forth, and help our restaurant industry recover from the pandemic.

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