IRS Updated Guidance: Business Deductions For Food/Beverage

April 28, 2020

The IRS and Treasury recently issued Notice 2021-25 providing updated guidance on business deductions for food and beverage expenses.  The guidance provides clarity on a provision in the Consolidated Appropriations Act of 2020 which was passed by Congress and signed by President Trump in December 2020.

Notice 2021-25 provides expanded guidance on defining qualifications for the temporary 100% deduction that businesses can use for food and beverages through December 31, 2022 (see previous JPS article to learn more).

According to the IRS and Treasury,

“For this purpose, the term “restaurant” means a business that prepares and sells food or beverages to retail customers for immediate consumption, regardless of whether the food or beverages are consumed on the business’s premises.

However, a restaurant does not include a business that primarily sells pre-packaged food or beverages not for immediate consumption, such as a grocery store; specialty food store; beer, wine, or liquor store; drug store; convenience store; newsstand; or a vending machine or kiosk.”

A helpful tip is for businesses to segregate these costs from other meal costs (e.g. pre-packaged meals) in ledgers so that the 100% deduction doesn’t mistakenly get limited to the usual 50%.

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