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Meal & Entertainment Deductions: 2021 & 2022 Edition

Congress and their infinite wisdom have left taxpayers with a different set of meals & entertainment rules for pre-2018, 2018-2020, 2021-2022, and post-2022; it's even hard for us tax professionals to keep it straight!


These are the current rules (2021 & 2022):



New 100% meal deduction for 2021 & 2022

Congress increased the business meal deduction for 2021 & 2022 from 50% to 100% for restaurants. This does not include grocery, liquor, drug, or convenient stores (these are capped at 50%.


Lets take a step back: what is a deductible business meal?

  • The taxpayer or the employee of the taxpayer, is present at the furnishing of food or beverages

  • Food & beverage is provided to a potential customer, client, consultant, or similar business contact.

  • Food & beverages must be separately stated from the cost of the entertainment.

Recreation & parties for clients is not deductible

Taking Bill, your best customer, to a UT football game would produce a $0 deduction.


However....


Recreation & parties for employees & their spouses are 100% deductible

As long as the party or recreation item is primarily for the employees (and not the owners).


“Primary” Means “More Than 50 Percent”

In tax law, the words “primary” and “primarily” mean “more than 50 percent.”


For employee recreation, that means the untainted group of employees has to have more than 50 percent use of the entertainment facility—or in the case of a party, a majority of the attendees must come from the untainted employee group.


Documentation tip. You can measure “primary” by days of use, time of use, number of employees, or any other reasonable method. Regardless of how you measure use, the key to your deductions is the records that prove the uses.


A more in-depth guide can be downloaded here:


Meals-Entertainment-Premium
.pdf
Download PDF • 320KB

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