Business expenses for food and beverages are subject to specific rules that generally limit deductions to 50% of the amounts incurred. The 50% limitation includes “de minimis” fringe deductions, meals provided for the convenience of the employer, and company cafeteria expenses. Very limited exceptions allow for 100% deductions in the cases of meals for employee recreational, social, and similar activities or in the case of food provided to the public.

The CAA modifies existing rules by making 100% of business meals deductible where the food and beverages are provided by a restaurant, and the expenses are paid or incurred between Jan. 1, 2021 and Dec. 31, 2022. This change is expected to increase business tax deductions for the next two years while also providing support to a restaurant industry that continues to face significant challenges due to COVID-19.