Restaurant meal expenses incurred by a business in connection with clients and employees are 100% tax deductible for 2022.  Enacted in December 2020 as part of the Consolidated Appropriations Act, this 100% deduction applies to years 2021 and 2022 only.  The purpose of this law was to help the restaurant industry that was badly damaged by the pandemic.

However, all good things must come to an end.  On January 1, 2023, the deduction (for most meals) reverted to only being 50% deductible, as defined in the Tax Cuts and Jobs Act of 2017. Entertainment expenses are still nondeductible.

To qualify as a tax-deductible expense, business meals must meet certain requirements.

  • The expense must be ordinary, necessary, and paid or incurred during the tax year.  The IRS defines this as expenses that are helpful and appropriate to your business, but not necessarily indispensable.
    • Example: Taking a client out for dinner to discuss business matters. The business purpose must be documented for every business meal, but you do not need to keep the actual receipt if the meal is under $75.
  • The taxpayer, or an employee of the taxpayer, must be present at the meal.
    • Example: An employer supplying breakfast to hard-working tax staff on Saturdays during tax season.
  • The expense must not be lavish or extravagant under the circumstances. The IRS does not define what constitutes lavish or extravagant, but some common sense does come into play. In the case of an audit, the IRS will consider the facts and circumstances to determine if you spent too much on a meal. 

Be sure to keep receipts and document on the receipt who was present at the meal and what was discussed.  These will be your proof of expenditure in the case of an audit.  And be aware that different types of meal expenditures will be subject to varying rates of deductibility.

Entertainment expenses, such as concert tickets, golf games, hockey games, etc., are not deductible even if you are taking a client. However, if food is involved and detailed separately on the receipt, that part of the expense might be deductible. Business meals with clients, and office snacks and meals are 50% deductible.

Meals that are still 100% deductible in 2023 and beyond:

  • Food served at company-wide parties.
  • Food and beverages offered on the business premises primarily for the benefit of employees.
  • Food and beverages given to the public—such as free snacks at a car dealership.
  • Expenses directly related to business meetings of employees, stockholders, agents, or directors.

Meals that are 80% deductible in 2023 and beyond:

  • Meals for employees subject to the U.S. Department of Transportation hours of service limitation.

Please be sure to consult your tax advisor at Ketel Thorstenson, LLP regarding this complex issue.