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How to Deduct Meals and Entertainment

Picture of Redpath and Company Redpath and Company : December 13, 2023

Tax Planning Strategies Taxes

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Type of Expense	Under 2018 Tax Reform ***Reinstated as of 2023	Under 2021 CAA *** No longer Valid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.