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In 2021 and 2022, businesses enjoyed a 100% deductible status for their meal expenses, but starting in 2023, there's a new 50% deductibility limit to consider.
In an effort to stimulate economic recovery and support businesses affected by the COVID-19 pandemic, the U.S. government introduced a temporary measure in 2021. This measure, later extended through 2022, allowed businesses to deduct 100% of their business meal expenses. This meant that any expenses related to meals conducted for the primary purpose of business were fully deductible.
However, as 2023 rolled in, a significant change occurred. The 100% deductible status enjoyed in the previous two years was replaced with a 50% deductibility limit. This means that businesses can now only deduct half of their meal expenses when they are incurred for business purposes. This new rule aims to strike a balance between supporting businesses and managing government revenue.
To make the most of the 50% deductibility limit, it's crucial for businesses to understand what qualifies as a deductible business meal. In 2023 and beyond, eligible business meal expenses include:
Proper record-keeping is essential to ensure you can accurately claim your business meal deductions. To avoid potential issues with the IRS, keep the following in mind:
The changes to business meal deductions for 2023 and beyond have important implications for businesses and individuals. While the previous years allowed for full deductibility, the new 50% deductibility limit necessitates a more careful approach to meal expenses. Understanding the rules and maintaining meticulous records are essential steps in ensuring that you maximize the tax benefits available while staying in compliance with the law.