Enhanced Business Meal Deduction
For 2021 and 2022 only, businesses can generally deduct the full cost of business-related food and beverages purchased from a restaurant. Otherwise, the limit is usually 50% of the cost of the meal.
To qualify for the higher limit,
· The business owner or an employee must be present when food or beverages are provided
· The expense cannot be lavish or extravagant.
· It Includes businesses that prepare and sell food or beverages to retail customers for immediate on-premises or off-premises consumption.
However, it does not include grocery stores, convenience stores and other businesses that primarily sell pre-packaged goods not for immediate consumption.
Home Office Deduction
With a growing number of business owners working from home, many may qualify for the deduction for business use of a home. Usually, a business owner must use a room or other identifiable portion of the home exclusively for business on a regular basis.
The regular method of determining the deduction requires Form 8829, Expenses for Business Use of Your Home. It divides the expenses of operating the home between personal and business use. Direct business expenses are fully deductible. The business portion of indirect expenses (real estate taxes, mortgage interest, rent, utilities, insurance, maintenance and repairs) is based on the percentage of the home used for business.
The simplified method of determining deductions is based on a 6-line worksheet in the instructions to Schedule C, the tax form for sole proprietors. This method uses a rate of $5/square foot for business use of the home. The maximum deduction is $1,500, based on business use of at least 300 square feet.
