Under current federal rules most business meal expenses remain deductible at 50% when they are ordinary and necessary and the taxpayer (or an employee) is present and engaged in a bona fide business discussion. This framework and the substantiation rules are explained in IRS Publication 463, Internal Revenue Service. Meals that are excessive or lack a clear business purpose generally do not qualify, and expenses that are part of entertainment are disallowed.
Qualifying conditions
To qualify for the 50% deduction the expense must be directly related to the active conduct of business or associated with a clear business discussion, and taxpayers must keep records to substantiate who attended, the business purpose, and the cost. IRS Publication 463, Internal Revenue Service, outlines these documentation requirements and the rule that the taxpayer be present. Meal expenses that are separately stated on a bill and not bundled with nondeductible entertainment are more easily supported.
Temporary change and reversion
For a limited period Congress temporarily increased the deduction to 100% for food and beverages provided by restaurants to encourage patronage of the hospitality industry. That change was enacted in the Consolidated Appropriations Act, United States Congress, and guidance was issued in IRS Notice 2021-25, Internal Revenue Service. The rule applied for the specified years set by the statute and subsequently reverted to the standard 50% treatment under existing law. This temporary boost sought to help restaurants and their workers during the pandemic, affecting cash flow and employment in many communities.
Exceptions, employer-provided meals, and state differences
Some employer-provided meals can be treated differently. Meals furnished for the convenience of the employer on the employer’s premises may be excluded from an employee’s income and have distinct tax treatment; see IRS Publication 15-B, Internal Revenue Service. In addition, small or de minimis meal benefits and certain cafeteria-type arrangements are subject to separate rules. States may not uniformly conform to federal changes, so the effective deductibility can vary by jurisdiction. For small businesses and restaurateurs the federal rules intersect with local economic and cultural realities, influencing how often client meals are offered and how hospitality is practiced.