TAX PROVISION

A Boost for the Dining Food Service Industry

Tax & Economic Provisions of 2021 Stimulus | January 2021

One of the provisions receiving the most publicity is a temporary lifting of the 50% limit on the deductibility of business meals provided by a restaurant for 2021 and 2022. In addition to providing tax relief to businesses, this provision is intended to boost the struggling food service industry.

This benefit applies not only to meals on the restaurant's premises, but also to takeout and delivery services. Businesses must continue to meet the existing requirements for the deductibility of meals. Therefore:

  • The meals cannot be lavish or extravagant;
  • The business owner or an employee must be present; and
  • The substantiation requirements still apply.

Entertainment expenses will continue to be nondeductible. If food or beverages are provided in conjunction with an entertainment activity, either they must be purchased separately from the entertainment or their cost must be separately stated on the bill.

While businesses certainly welcome this temporary relief, they will need to quickly implement procedures to properly track meals eligible for the 100% deduction.