Overview

Federal tax law treats most business meal costs as deductible only to the extent of 50% of the expense under section 274 of the Internal Revenue Code. That limit applies to meals with clients, meals while traveling for business, and many employee meal situations unless a specific exception applies. For details on recordkeeping and travel rules, see IRS Publication 463 (Travel, Gift, and Car Expenses).

Temporary restaurant exception (2021–2022)

Congress temporarily allowed a 100% deduction for food or beverages provided by a restaurant for amounts paid or incurred in 2021 and 2022 (Consolidated Appropriations Act, 2021, Pub. L. No. 116-260). That was intended to help restaurants during the COVID-19 recovery. The 100% treatment expired after 2022, and the 50% rule generally resumed for tax years beginning in 2023 unless changed by new legislation.

Which expenses qualify

  • Ordinary and necessary: The meal must be ordinary and necessary in your trade or business (IRC §162 and §274).
  • Directly related or associated: The meal must be directly related to or associated with business discussions or business activity (examples below).
  • Not lavish or extravagant under the circumstances.

Common qualifying situations

  • Client or prospect meetings where business is discussed.
  • Meals during business travel away from your tax home (subject to travel rules).
  • Staff meals at business events, subject to substantiation and reasonableness.

What doesn’t qualify

  • Personal meals that lack business purpose.
  • Meals that are primarily entertainment (entertainment expenses are generally nondeductible since the TCJA).

Documentation you must keep

Good records make the deduction defensible. At a minimum keep:

  • Date and amount of the expense.
  • Place or name of the restaurant/vendor.
  • Business purpose and a short description of the business discussion.
  • Names and business relationship of attendees.
  • Itemized receipt or other documentary evidence for amounts $75 or more (and generally for all meal claims when possible).

(See IRS Publication 463 for substantiation rules.)

Example calculations

  • 2020 or typical year: A $200 client lunch would be deductible up to $100 (50%).
  • 2021–2022 (restaurant meal): The same $200 lunch at a restaurant was deductible in full (100%).
  • 2023+: The deduction reverted: $200 lunch → $100 deduction, unless a later law changes the rate.

Who can claim the deduction

Sole proprietors, partnerships, S corporations, corporations and other entities can claim business meal deductions when the expense meets the rules. Self-employed taxpayers report meal deductions on Schedule C (Form 1040); partnerships and corporations follow their normal business-return reporting rules.

Practical tips from experience

  • Log meals promptly: In my practice working with small businesses, I see the strongest audit files when a calendar note or digital expense record ties the receipt to a clear business purpose and attendees.
  • Use company cards or expense software that captures receipts and attendee lists to reduce later reconstruction.
  • When hosting large staff events, document the business reason (e.g., training, project kickoff) and keep an attendee list.
  • Consider alternatives (e.g., client gifts, advertising) if an expense risks being classified as entertainment.

Common mistakes

  • Assuming every business meal is deductible—personal portions and purely social meals are not deductible.
  • Relying on bank/credit-card statements alone; itemized receipts and a business purpose are critical.
  • Applying the 100% restaurant rule outside 2021–2022; the temporary allowance expired and should not be claimed for 2023+ returns.

Related FinHelp resources

Authoritative sources

  • IRS Publication 463, Travel, Gift, and Car Expenses: https://www.irs.gov/publications/p463
  • Consolidated Appropriations Act, 2021 (temporary restaurant deduction provision): Pub. L. No. 116-260

Professional disclaimer

This article is educational and does not constitute tax advice. Rules change and individual situations vary; consult a qualified tax professional or the IRS for guidance tailored to your facts.