As you may already know, there have been some major changes to the business meal deduction for 2023 and beyond.
The deduction for business meals has been reduced to 50 percent, a significant change from the previous 100 percent deduction for business meals in and from restaurants, which was applicable only for the years 2021 and 2022.
To help you better understand the current situation, see the table below:
|
|
Amount Deductible for Tax Year 2023 and Beyond |
||
|
Description |
100% |
50% |
Zero |
|
Restaurant meals with clients and prospects |
|
X |
|
|
Entertainment such as baseball and football games with clients and prospects |
|
|
X |
|
Employee meals for convenience of employer, served by in-house cafeteria |
|
X |
|
|
Employee meals for required business meeting, purchased from a restaurant |
|
X |
|
|
Meal served at chamber of commerce meeting held in a hotel meeting room |
|
X |
|
|
Meal consumed in a fancy restaurant while in overnight business travel status |
|
X |
|
|
Meals cooked by you in your hotel room kitchen while traveling away from home overnight |
|
X |
|
|
Year-end party for employees and spouses |
X |
|
|
|
Golf outing for employees and spouses |
X |
|
|
|
Year-end party for customers |
|
|
X |
|
Meals made on premises for general public at marketing presentation |
X |
|
|
|
Team-building recreational event for all employees |
X |
|
|
|
Golf or theater outing or football game with your best customer |
|
|
X |
|
Meal with a prospective customer at a country club following your non-deductible round of golf |
|
X |
|
How to Qualify
Your deductible business meals must be tax code Section 162 ordinary and necessary business expenses, and they must not be subject to disallowance under tax code Section 274.
You must be present at the business meal, and you must provide the business meal to a person with whom you could reasonably expect to engage or deal with in the active conduct of your business, such as a customer, client, supplier, employee, agent, partner, or professional advisor, whether established or prospective.
What is a Restaurant?
The IRS recently provided definitions and examples of what is and is not a restaurant.
A restaurant 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 any of the following:
• Grocery stores
• Specialty food stores
• Beer, wine, or liquor stores
• Drug stores
• Convenience stores
• Newsstands
• Vending machines or kiosks
In conclusion, the rules for meal deduction are tricky – make sure you know them!
Takeaways
If you have questions, don’t hesitate to contact me by scheduling a call, or by emailing at [email protected].
We specialize in helping clients clarify their taxes so they keep more of their money. Many small business owners who come to see us in Fort Worth, TX generally do not understand the tax law enough to explain it to a fifth grader.
Tatsiana B. Bender
Bender CPA, PLLC
Fort Worth, TX 76107
[email protected]
Phone: (817) 313-4352
Bender-CPA.com
