by Guysmarket
Taxpayer Certainty and Disaster Relief Act of 2020 had a rule that allowed businesses to take 100% deductions off restaurant meals.
Prior to this rule, restaurant meals were only 50% deductible. This rule did not apply to pre-prepared meals, grocery bought foods. Groceries are also 50% deductible. The purpose of this tax benefit was to help restaurants during a time that the hospitality industry was suffering. This benefit comes to an end at the start of 2023
Here is the rule: IRS Rules
So let me explain why this is bad for restaurants. In a companies accounting, they label each expense.
For example, a grocery related expense is expensed to a general ledger account code 5001
A restaurant related expense is expensed to a general ledger account code 5002
all the expenses under account code 5001 are 50% deductible
all the expenses under account code 5002 and 100% deductible
So here’s the current situation in 2021 to 2022 with examples: Current Example
And here’s how that tax amount will change in 2023: Future Example
Notice how in the future example, companies will have to pay more tax. So this benefit going away will in my personal opinion, discourage businesses to take our employees for restaurant meals. Sure it will still happen, but I think it will happen much less.
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