The Disaster Relief Act of 2020
The Disaster Relief Act of 2020 added a temporary exception to the 50% limit on the amount that businesses may deduct for food or beverages. The temporary exception allows a 100% deduction for food or beverages from restaurants.
Beginning Jan. 1, 2021, through Dec. 31, 2022, businesses can claim 100% of their food or beverage expenses paid to restaurants as long as the business owner (or an employee of the business) is present when food or beverages are provided, and the expense is not otherwise “lavish or extravagant” under the circumstances. As far as claiming this deduction, under the temporary provision, restaurants include businesses that prepare and sell food or beverages to retail customers for immediate on-premises and/or off-premises consumption. However, this definition of qualifying restaurants does not include businesses that primarily sell pre-packaged goods, not for immediate consumption, such as grocery stores and convenience stores. Additionally, an employer may not treat certain employer-operated eating facilities like restaurants, even if a third party operates these facilities under contract with the employer. (Code §274; Food and Beverage Deduction). This exception also applies to the cost of meals while in “travel status” for tax purposes.
Dr. John Connors, J.D., CPA, LLM
Tax Educator’s Network, LLC
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