As Usual – I am Wrong
I have been teaching tax update classes the last couple of weeks and one of the questions still left unanswered is whether taxpayers who reimburse employees for meals using a per diem qualify for the 100% restaurant meals deduction or whether it is still a 50% meal deduction.
During these sessions I surmised that it was likely a 50% meals deduction unless the employee provided some type of evidence that they obtained a meal from a restaurant.
The IRS today shot down my assumption and released Notice 2021-63 that indicates the meals portion of any qualified per diem will be considered 100% deductible. This is good news for farmers and other taxpayers.
The bottom line is the qualified portion of a per diem will be 100% deductible for those days occurring after December 31, 2020 and before January 1, 2023.
The law passed late in 2020 allows all meals provided by a restaurant to be 100% deductible if used for business purposes. However, these meals must be from a restaurant or a business that primarily prepares meals for consumption on-site or off-site. Meals obtained from a grocery or convenience store do not qualify.
Most trips that I make to the Midwest include at least one stop at Casey’s to get a slice of pepperoni pizza. That does not qualify for the 100% deduction but that pizza does have the right amount of grease (actually Casey’s pizza is pretty good).
Paul Neiffer is a certified public accountant and business advisor specializing in income taxation, accounting services, and succession planning for farmers and agribusiness processors. Paul is a principal with CliftonLarsonAllen in Walla Walla, Washington, as well as a regular speaker at national conferences and contributor at agweb.com. Raised on a farm in central Washington, he has been immersed in the ag industry his entire life, including the last 30 years professionally. Paul and his wife purchase an 180 acre ranch in 2016 and enjoy keeping it full of animals.
Paul, can you give me some background on why meals from convenience stores and grocery stores do not qualify – as a farmer and rancher in a very sparsely populated area of Nebraska we have very few options for meals except those two options – many small communities don’t even have a grocery store that serves meals but they do have a convenience store with meals/food. I have started to see some small communities combine a small grocery store with the c-store. Just curious – sad once again those of us in more rural areas with few choices for meals, don’t have the option for the deduction.