Are meals eaten in a restaurant tax deductible for the 2023 tax year?

The deductibility of meals eaten in a restaurant for the 2023 tax year is influenced by several provisions and exceptions within the Internal Revenue Code (IRC) and guidance provided by the IRS. The key provisions to consider are found in Notice 2021-25, Publication 463 (2022), § 1.274-12, § 274 of the IRC, Notice 2018-76, and the analysis provided in "Are Client Meals Deductible after the Tax Cuts and Jobs Act?".

1. Temporary 100-Percent Deduction: According to Notice 2021-25, there was a temporary 100-percent deduction for food or beverages provided by a restaurant, applicable for expenses paid or incurred after December 31, 2020, and before January 1, 2023. This temporary provision allowed for a full deduction of such expenses, deviating from the general 50-percent limitation.
2. General 50-Percent Limitation: Outside of the temporary 100-percent deduction period, § 274(n)(1) of the IRC generally limits the deduction for food or beverage expenses to 50 percent of the amount that would otherwise be deductible. This limitation applies unless an exception in § 274(n)(2) is applicable.
3. Definition of a Restaurant: For the purposes of the deduction, a restaurant is defined as a business that prepares and sells food or beverages to retail customers for immediate consumption, regardless of whether the food or beverages are consumed on the business's premises. This definition excludes businesses that primarily sell pre-packaged food or beverages not for immediate consumption.
4. Exceptions and Clarifications: Notice 2018-76 and "Are Client Meals Deductible after the Tax Cuts and Jobs Act?" provide further guidance on the deductibility of business meals. Notice 2018-76 outlines criteria for a 50-percent deduction of business meal expenses, including the requirement that the taxpayer or an employee of the taxpayer is present at the furnishing of the food or beverages, and the food and beverages are provided to a current or potential business customer, client, consultant, or similar business contact.

Given the information provided, for the 2023 tax year, meals eaten in a restaurant would generally be subject to the 50-percent limitation on deductibility under § 274(n)(1) of the IRC, as the temporary 100-percent deduction specified in Notice 2021-25 applied only to expenses paid or incurred before January 1, 2023. Therefore, unless another specific exception applies, only 50 percent of the cost of meals eaten in a restaurant for business purposes would be deductible for the 2023 tax year.

Sources:

§ 274. Disallowance of certain entertainment, etc., expenses https://app.askbluej.com/source?ref=statute/26/274

§ 1.274-12. Limitation on deductions for certain food or beverage expenses paid or incurred after December 31, 2017.

Notice 2018-76

Notice 2021-25

Publication 463 (2022)

https://www.taxnotes.com/lr/resolve/28hsf