So, what is a qualifying meal and who can deduct it?

Business meals are only deductible by the business. This includes partnerships, corporations, S corporations and sole proprietorships.

The deduction for business meals is generally 50% of the actual expenditure however until the end of 2022 100% of the cost of meals consumed in a restaurant are deductible. Avoid getting your business lunch at Seven Eleven or the grocery store where they are only 50% deductible and be sure to use a restaurant.

To be deductible the meal’s cost must be paid for by the business, either directly or through a reimbursement. Business meals are NOT deductible by employees. If you receive a W2 and are not reimbursed unfortunately you are out of luck, as you are unable to deduct this amount from your return.

For a business meal to be deductible it must be:

(1) ordinary and necessary AND paid or incurred during the tax year;

(2) NOT lavish or extravagant under the circumstances;

(3) the taxpayer, or an employee of the taxpayer, must be present at the furnishing of the food or beverages;

(4) food and beverages are provided to someone with a business relationship to the taxpayer’s business, a current or potential business customer, client, consultant, or similar business contact; and

(5) must not include the cost of entertainment

The deduction also requires substantiation be maintained including, the amount spent, the time and place, the business purpose, and the business relationship of the individuals involved. It’s important to set up a detailed record-keeping procedures to keep track of each business meal and to justify its business connection.