Tax Update: Increasing Your Meals & Entertainment Deduction for 2021 & 2022
To spur the restaurant industry in the wake of the COVID-19 pandemic and its economic fallout, Congress passed the Consolidated Appropriations Act (“CAA”) in December 2020. The CAA allows businesses to fully deduct expenses for eligible restaurant meals incurred in 2021 and 2022.
Prior to this, the Tax Cuts and Jobs Act (“TCJA”) eliminated the entertainment expense portion of the deduction for all tax years after 2017. Essentially, entertaining clients or employees at a ballgame or concert is no longer a tax-deductible expense, and eligible food and beverage related business expenses are 50% deductible for the current tax year.
To be considered an eligible expense, the taxpayer or an employee of the taxpayer must be present for the meal, and it must be provided either to you, an employee, or a person you intend to do business with in the future. However, the new CAA supersedes the TCJA for 2021 and 2022.
While entertainment expenses are still not deductible, 100% of the eligible expense from restaurant-provided meals will be deductible.