The Treasury Department and the Internal Revenue Service announced guidance under the Taxpayer Certainty and Disaster Relief Act of 2020, which gives breaks to businesses for certain expenses.
The act added a temporary exception to the 50% limit on the amount that businesses may deduct for food or beverages and allows for a 100% deduction for food or beverages from restaurants.
Businesses can claim 100% of their food or beverage expenses paid to restaurants starting on Jan. 1, 2021 through Dec. 31, 2022. The expenses can be claimed when a business owner (or an employee of the business) is present when food or beverages are provided and the expense is not lavish or extravagant under the circumstances.
When can the expense be claimed?
Businesses can claim the expense for restaurants that prepare and sell food or beverages to retail customers for immediate on-premises and/or off-premises consumption. The expense can’t be claimed for entities that primarily sell pre-packaged goods not for immediate consumption. This includes, for example, grocery stores and convenience stores.
“Additionally, an employer may not treat certain employer-operated eating facilities as restaurants, even if these facilities are operated by a third party under contract with the employer,” the IRS stated in a release.
For more information about COVID-19-related tax relief, head to irs.gov