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New Tax Law: 100% Business Deduction for Food & Beverage Expenses

Business owner do you spend money on food & beverage services from restaurants? You are now eligible for a 100% tax deduction on these expenses starting from January 1, 2021 forward. On April 8, 2020, The Treasury Department and the Internal Revenue Service issued Notice 2021-25 to increase tax relief for businesses under the Taxpayer Certainty and Disaster Relief Act of 2020. This newly implemented notice temporarily increases the 50% tax relief that was previously allocated for food and beverage expenses from restaurants.

IRS Notice 2021-25 will be put into effect until December 31, 2022, which guarantees your business an increased tax deduction if it meets certain payment requirements. A business owner or employee must be present when a transaction is made for food and beverage services. Remember, that expenses made to restaurants should also not be excessive, lavish, or extravagant.

The types of businesses whose services are included in this temporary provision also come with specific requirements. Under Notice 2021-25, restaurants are food and beverage establishments that provide services for immediate consumption either on or off-site. Restaurants that supply pre-packaged food for later consumption are not included in this latest tax provision. This ultimately excludes expenses made at grocery stores or convenience stores from being eligible for a tax deduction. Also note that employer-operated food establishments, including any owned by a third-party business under contract with an employer, cannot be deemed as restaurants according to this latest provision.

Jace Kentner

Tax Attorney


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