IRS Provides Guidance on 100% Deductions for Meals and Beverages

On April 8, 2021, the Internal Revenue Service (IRS) issued Notice 2021-25 that provides guidance on the temporary exception that allows a business a 100% deduction for food or beverages from restaurants. Beginning January 1, 2021, through December 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 lavish or extravagant under the circumstances.

Per the IRS, 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, restaurants do not include businesses that primarily sell pre-packaged goods not for immediate consumption, such as grocery stores and convenience stores.

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