How to Deduct Meals and Entertainment

    How to Deduct Meals and Entertainment

    by Redpath and Company

    Editor's note: Updated in 2023 to reflect current legislation.

    The Consolidated Appropriations Act (CAA) 2021 was introduced to provide temporary 100% deduction for expensing business meals purchased from qualifying restaurants after Dec. 31, 2020, and before Jan. 1, 2023. Under Notice 2021-25, the IRS defines qualifying restaurants as businesses that prepare and serve food and drinks for immediate consumption, whether on or off-premises.

    Differences in 2021 CAA and 2018 Tax Reform

    Different deductions were allowed during the Covid-19 pandemic as a result of the CAA. As of January 1, 2023, deductions have reverted back to where they were prior to 2021. The majority of business meals are now 50% deductible, and most entertainment expenses are not deductible at all.

    Type of Expense

    Under 2018 Tax Reform

    ***Reinstated as of 2023

    Under 2021 CAA

    *** No longer Valid 

    Recreational or social activities for employees (e.g. summer picnic, holiday party, etc.)

    Fully deductible

    Fully deductible

    Business meals (e.g. meals for out-of-town travel, meals during business discussions with clients, etc.)

    50% deductible if not lavish or extravagant

    100% deductible if not lavish or extravagant and purchased from a qualifying restaurant 

    Entertainment-related meals

    Nondeductible, unless separately stated from the cost of the entertainment – if so, 50% deductible

    Nondeductible, unless separately stated from the cost of the entertainment – if so, 50% deductible

    Sporting events, concerts, etc.

    Nondeductible

    Nondeductible

    De minimis items provided to employees at the office (e.g. coffee, snacks, water, etc.)

    50% deductible

    50% deductible

    Meals provided at the convenience of the employer at an on-site eating facility

    50% deductible

    50% deductible

    Goods, services, and facilities made available to the general public (e.g. grand openings, etc.)

    Fully deductible

    Fully deductible

    It is important to review how your meals and entertainment expenses are categorized.  Long ago, the characterization between meal and entertainment expenses was irrelevant because the treatment was the same. It remains important to separate entertainment expenses from meal expenses. If you have further questions, you should reach out to your trusted tax planning advisor.

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    Redpath and Company

    Redpath and Company

    Redpath and Company help clients make more informed decisions that contribute to their financial well-being by providing proactive, innovative, and value-driven CPA and advisory services for closely-held businesses, private equity, government entities, and nonprofit organizations. Core commercial industries served include retail, manufacturing, distribution, construction, real estate, engineering, and technology. Areas of service expertise include audit and assurance; personal, business, and international tax; state and local tax; sales and use tax; and succession and estate planning. Redpath also guides clients throughout the entire business life cycle with M&A advisory services (corporate and deal strategy, transaction support, and integration); accounting and financial management outsourcing; and valuation services. The firm was founded in 1971 and is employee owned (ESOP). With offices located in St. Paul and White Bear Lake, Minnesota, the firm ranks as one of the top CPA and advisory firms in Minnesota and is a top 120 firm nationally. Redpath is a member of HLB International, a global network of independent advisory and accounting firms. For more information, visit www.redpathcpas.com.