Per Diem Rates from the U.S. General Services Administration

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Rates are set by fiscal year, effective October 1 each year. Find current rates in the continental United States ("CONUS Rates").

Per Diem Rates

Meals 100% Deductible

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Entertainment expenses paid or incurred after December 31, 2017 are no longer deductible. However, the meal costs remain deductible with certain limits.

100% Meal Cost Deduction:

For tax years 2021 annd 20211, business meals provided at restaurants are 100% deductible. This includes out-of-town business meals as well as in-town business meals with customers, clients and other business associates.

The IRS defines restaurants to include businesses that perpare and sell food or beverages to retail customers for immediate consumption on or off the premises. The IRS excludes businesses that primarily sell pre-packaged food not for immediate consumption, such as grocery stores and convenience stores.

The cost of food and beverages provided to employees at a recreational, social or similar activity that is primarily for the benefit of your non-highly paid employees, is 100% deductible. This includes holiday parties, annual picnics, summer outings and other similar events.

If you provide food and beverages to the general public for advertising or to establish goodwill, the cost is 100% deductible. If the food and beverages are consumed by customers and employees, the cost are 100% deductible if more than 50% is consumed by customers. If the more-than-50% test is not met, then only the costs attributable to customers is 100% deductible.

A restaurant or catering business that sells food and beverages to customers my deduct 100% the costs even if employees are allowed to eat for free before, during or after their shifts.

50% Deduction Limit for Meals Not Provided at a Restaruant:

The 50% limit applies to pre-packaged food or beverages provided by grocery stores, convenience stores, specialty food stores, newsstands, vending machines, kiosks, beer, wine or liquor stores.

Meals and Beverages During and an Entertainment Activity:

Though entertainment expenses are no longer allowed, the 50% deduction for business meals is still allowed (Notice 2018-76), provided:

• The expense is an ordinary and necessary business expense paid or incurred during the tax year;
• The taxpayer, or an employee of the taxpayer, is present at the furnishing of the food or beverages;
• The cost of the food and beverages is not lavish or extravagant. (Use common sense here. The IRS doesn't define what constitutes lavish or extravagant.);
• The food and beverages are provided to a current or potential business customer, client, consultant, or similar business contact; and
• When food and beverages are provided during an entertainment activity, the cost of the food and beverages are purchased separately from the entertainment, or the cost of the food and beverages is stated separately from the cost of the entertainment on a bill, invoice, or receipt.

Examples:

1. You take a client to a ball game. The cost of the tickets are not deductible. The cost of hot dogs and drinks purchased separately are deductible.
2. You take a client to a dinner-theater. The bill combines the cost of the entertainment, food and beverages and shows the total cost as one amount. You cannot deduct either the cost of the entertainment or the cost of the food and beverages.
3. Same facts as in example 2, except the bill states the cost of the food and beverages separately. You may deduct 50% of the cost of the food and beverages. The entertainment cost is not deductible.