Expert Counsel. Exceptional Solutions.

+1 (916) 822-8700

News & Analysis
Latest legal news and recent law changes.

Temporary 100% Deduction For Food Or Beverages Purchased From Restaurants

It’s been almost two years since the World Health Organization declared the Covid-19 disease a pandemic, and yet the resulting hardships that stem from the economic fallout continue to flourish. The pandemic has impacted every industry in one way or another. However, the resulting economic downturn disproportionately negatively impacted the restaurant industry more than any other industry in the nation. A qualitative study of the pandemic impact on the restaurant industry reported that at the peak of the pandemic, during the shelter in place order, the food service industry lost nearly 3.1 million jobs, and more than 110,000 restaurants were projected to permanently close due to the economic fallout caused by the pandemic.i

When the Temporary 100% Deduction Applies

To provide economic assistance to the food service industry, congress enacted the Taxpayer Certainty and Disaster Tax Relief Act of 2020 (Act). The Internal Revenue Code (Code) allows a deduction for business-related meals. Generally, expenses for business-related meals are limited to a 50% deduction. However, the Act provides a temporary exception to the 50% limit when business food and beverages are purchased from a restaurant. This temporary exception allows a 100% deduction for any business-related meals purchased from restaurants in 2021 or 2022 taxable years.

For the purposes of the Act, the IRS defines a “restaurant” as a business that prepares and sells food or beverages to retail customers for immediate consumption, regardless of whether the food or beverages are consumed on the business’s premises.ii

Additionally, the 100% deduction will also apply to any meal expenses incurred in connection to marketing, promotional, or social events (such as a company picnic, holiday parties, or team building events) hosted by the business.

When the Temporary 100% Deduction Does Not Apply

The following business and eating facilities are not considered restaurants for the purpose of the Act and are still limited to a 50% deduction:

• Any business that primarily sells pre-packaged food or beverages not intended for immediate consumption is not considered a restaurant for purposes of the Act. This includes grocery stores; specialty food stores; beer, wine, or liquor stores; drug stores; convenience stores; newsstands; and vending machines or kiosks. 2

• Any eating facility located on the business premises and provides meals to the business’s employees pursuant to their employment.

• Any employer-operated eating facility treated as de minimus fringe (meaning the benefits are so small and so infrequent accounting for it is unreasonable and impracticable).

Additionally, such business-related meals cannot be lavish or extravagant under the circumstances, and the taxpayer (or an employee of the taxpayer) must be present when the business meal is purchased. Otherwise, no portion of the meal is deductible as a business expense. It’s important to note that just because a restaurant is expensive does not mean it is lavish or extravagant. The IRS will look at the context and circumstances to determine if an expense was lavish or extravagant. iii

Temporary 100% Deduction and Per Diem Rates or Allowances

To deduct certain business expenses paid or incurred while on a business trip, a business is required to provide evidence to prove that such expense was a business expense. To do this, the business can either:

    (i) provide evidence of the actual allowable expense by maintaining adequate records of the date, location, and purpose of the trip, or other sufficient evidence (such as keeping receipts), or

   (ii) the business can use a per diem rate or allowance (fixed amount of reimbursement paid to employees for expenses incurred during business-related travel) that is equal to or less than the rate set each year by the General Services Administration (GSA).

If the business chooses to use a per diem rate, the deduction for such expense is allowed, and no further documentation is required. Furthermore, suppose a per diem rate or allowance is explicitly provided for Meal and Incidental Expenses (M&IE). In that case, such expense is treated as a business-related meal and is limited to a 50% deduction. However, the IRS has issued a temporary special rule that permits a business to treat the full M&IE of a per diem rate or allowance (that is equal to or less than the GSA rate) as a business meal purchased from a restaurant and will thus be 100% deductible if purchased in 2021 or 2021.iv

Although the per diem rate requires less elaborate bookkeeping, the temporary 100% deduction offers businesses an additional incentive to itemize their business-related meal expenses. In January 2021, the M&IE per diem rate set by the GSA was $66 per day. Per the special rule, 100% of that $66 will be deductible whether the meal was purchased from a restaurant or not. However, suppose an employee is on a business trip in Sacramento, and they have a business-related meal that is more than $66 (and is not deemed to be lavish or unreasonable under the circumstances). In that case, the business is permitted to take a larger deduction for such expense. Additionally, this will ensure that the business-related meals are actually purchased from restaurants and will assist in providing the restaurant industry the financial support it so desperately needs.


This article is intended to provide you with a comprehensive summary of the temporary 100% deduction and is not intended to serve as legal or tax advice.

Fully deductible items include business meals with clients (purchased from the restaurant); office snacks and meals (if purchased from a restaurant); and company-wide parties.

We strongly advise you to discuss the temporary 100% deduction with your tax advisor. Taking full advantage of this deduction could provide a sizeable financial benefit to your business (by reducing the amount of taxes owed) while simultaneously stimulating the struggling restaurant industry.

i Julia F. Lippet, Mackenzie B. Furnari, and Charlie W. Kriebel, The Impact of the COVID-19 Pandemic on Occupational Stress in Restaurant Work: A Qualitative Study (Oct. 2, 2021),

ii Notice 2021-25

iii Revenue Procedure 2019-48

iv Notice 2021-63