Tax preparation is a big part of running a successful business. The food and entertainment tax deduction has become an important way for small business owners to reduce their tax liability each year. Unfortunately, the food discount rate will be cut in mid-2023 from the 2022 discount levels.
Keep reading as we share the food and entertainment leftovers for 2023. This may help you take advantage of some great tax savings. Few of you reading this have left your office space and are holding most of your meetings at restaurants.
How Business Owners Discount Food and Entertainment
The value of the food and entertainment tax deduction has changed over the past few years. With the passage of the 2018 Tax Cuts and Jobs Act (TCJA), known as the Trump Tax Plan, you will no longer be able to deduct recreational expenses. The ticket price is also exempt if you like to entertain at a concert or treat your customers to a Broadway show.
There are other deductions that qualify as Meals and Entertainment Tax deductions.
2023 Food and Entertainment Discounts Allowed
It would be very helpful to discuss what will still be tax deductible for food and entertainment tax exemptions in 2023. Here are some tax exemptions that can range from half to full exemptions.
· Food for businesses and customers (50%)
Office meals (50%)
Food on the way to work (50%)
Meals at the meeting (50%)
Corporate holiday catering (100%)
Food and beverages served to the public (100%)
· Dinner for late office workers (100%)
Your 2023 Diet Guide
For 2023, most business meals are only 50% deductible, according to the IRS rule. Let’s say you take your favorite client out to dinner (to discuss business); you can deduct half of the cost of food. On the other hand, if you go out to eat with a client for no business purpose, the meal is not deductible.
To add to the confusion, meals were discounted 100% in 2021 and 2022. This was a temporary change to help boost restaurant spending during the COVID pandemic.
How to Save Your Food Tax Deductions
Let’s say you’re looking to get rid of a business meal that costs more than $75; You must keep receipts or records of food costs. For meals under $75, the IRS does not have a specific requirement to keep receipts to record the amount. Either way, you’ll still want to keep a record of your deductible meal, including: date of meal, amount including tax and tip, name of restaurant, business meal information (who attended and how it relates to your business).
Your Guide to Fun Discounts
We mentioned earlier that most of the game money is no longer deductible.
Here are some of the exceptions that will still be tax deductible in 2023—expenses for events like a company holiday party or paid trip, expenses for business meetings, chamber meetings, professional associations, and even conferences. Also, if you sell entertainment to your customers, there are exceptions to the entertainment discounts. For example, if a bar owner is paying a team to serve customers, this can be a business deduction.
How To Recover Lost Food Deductions In 2023
Make sure you have the right retirement plan for your small business. Look to increase your contributions to your 401(k) plan. If you want to reduce your capital gains tax, consider setting up a Cash Balance Pension Plan.