Tax Tips: Per Diem Rates and 100% Deduction for Food or Beverages

The IRS has issued guidance that clarifies how the temporary 100% business deduction for food or beverages from restaurants applies to taxpayers properly applying the rules for using per diem rates.

Previously, the IRS provided guidance under the Taxpayer Certainty and Disaster Relief Act of 2020, which added a temporary exception to the 50% limit on the amount that businesses may deduct for food or beverages. The temporary exception allows a 100% deduction for food or beverages from restaurants, as long as the expense is paid or incurred in 2021 or 2022.

Special Rule for Per Diem Rates

For a taxpayer properly utilizing a per diem rate for meal expenses, the IRS provides a special rule that allows the taxpayer to treat the entire meal portion of a per diem rate or allowance as being attributable to food or beverages from a restaurant beginning Jan. 1, 2021, through Dec. 31, 2022.

The Cambaliza McGee LLC team is ready to assist you in reviewing your tax situation to understand how your business may benefit from the temporary enhancement changes that may apply to business meals deduction.