I know I’ve written about this before, but I just had a long-term client question me about these rules again.   And, if he could forget- so could you.

More importantly, we have a slew of restaurants and hotels as clients- and they are counting on us to help them restore their business. So, for them- and every other restaurant and hotel out there, I am going to repeat the rules that obtain for 2021 and 2022.

To help our restaurants and hotels recover from the pandemic restrictions imposed to help us survive the onslaught of COVID-19, a new law was enacted on 27 December 2020.  Basically, the rules stipulate that meals bought from hotels or restaurants have the ability to be 100% deductible- not the 50% that obtained previously or the NON- deductibility that sometimes came into play.  (You do recall since 1986 our elected officials have been limiting our ability to deduct business meals- from 100% to 80%- and then down to 50% [with the occasional zero thrown in for good measure].)

The key point is the meal MUST be obtained and purchased from a restaurant or hotel.  This choice was made to help these businesses get a chance to recover from all the lost business when we quarantined folks and refused to let the establishments serve meals in their dining rooms.   (NOTE:  To garner this benefit, we can dine in the restaurant, order takeout, or use a delivery service- all of it counts.)

Note that the IRS has clearly defined what a restaurant is, as well.  The establishment is 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.”  It is NOT a “business that primarily sells pre-packaged food or beverages not for immediate consumption”.  That latter sentence obviates grocery stores, specialty food stores, drug stores, convenience stores, liquor stores, kiosks, or newsstands.  These latter establishments are subject to the pre-2021 (and 2022) deduction limitation of 50%.

One of the nice changes in the rules the IRS promulgated for business meals is the following sentence:  “Meal expenses won’t be disallowed merely because they are more than a fixed dollar amount or because the meal takes place at deluxe restaurants, hotels, or resorts.”  (In other words, the US government is willing to help any restaurant or hotel make money- regardless of its price range.)

There is a wrinkle- of sorts.  You cannot purchase the business meal and deliver it to a customer or client.  Nor can you buy the client’s meal and not be present.

Now, go out and support our restaurant/hotel industry!

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