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Business Meals May Serve Up Big Deductions

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As the country emerges from the pandemic this summer, more people are going places, engaging in recreational activities and enjoying the great outdoors. This can lead to tax-saving opportunities for both individual taxpayers and small business owners. Accordingly, we have developed a six-part series devoted to tax strategies in the summer of 2021.

Jul 7th 2021
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Taxpayers may benefit from a temporary tax law provision that doubles the usual 50 percent deduction for qualified business expenses for meals to 100 percent of the cost.

The fact is, people are back to dining out this summer as the pandemic abates in many parts of the country. However, when it comes to deductions for business meals, the Tax Cuts and Jobs Act (TCJA) had permanently eliminated deductions for business entertainment expenses after 2017, including related business meals. This may no longer be the case…

Background: Prior to the TCJA, taxpayers could in fact deduct 50 percent of business entertainment expenses that were “directly related to” or “associated with” their business. This included the cost of meals preceding or following a substantial business meeting—say, dinner at the golf club after a presentation to a potential client.

Similarly, they were able to deduct 50 percent of their meal expenses while traveling on business. For instance, if you were holed up a hotel for a few days working out a business deal and spent $500 on food and beverages, you could deduct $250.

Important point: Despite the TCJA crackdown on entertainment expense deductions, you may still deduct meal expenses while you’re away from home on business. Subsequent IRS guidance established that meals remain deductible if these requirements are met.

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