June 2022
We don’t usually expect to read about taxes and good news in the same sentence. So, it’s my pleasure to let you know about two ways the IRS is helping business owners increase expense deductions this year.
Mileage
Starting July 1, the IRS increased the mileage rate to 62.5 cents per mile for the remainder of 2022. The optional business standard mileage rate is used to compute the deductible costs of using a vehicle for business use in lieu of tracking actual fuel and maintenance costs. This rate is also used as a benchmark by the federal government and many businesses to reimburse their employees for mileage.
Meals
The enhanced meal deduction is available for 2021 and 2022. 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.
There are specifics you need to meet to qualify for the enhanced deduction:
The business owner or an employee of the business must be present when food or beverages are provided.
Meals must be from restaurants, which includes businesses that prepare and sell food or beverages to retail customers for immediate on-premises or off-premises consumption.
Payment or billing for the food and beverages occurs after December 31, 2020, and before January 1, 2023.
The expense cannot be lavish or extravagant.
Grocery stores, convenience stores and other businesses that mostly sell pre-packaged goods not for immediate consumption, do not qualify as restaurants.
Employers may not treat certain employer-operated eating facilities (your company cafeteria, for example) as restaurants, even if they operate under contract by a third party.
Market and Margin is always on the lookout for ways to benefit your company. I hope you find these tips useful. Give me a call on (512) 554-8707 or email me at [email protected] with any questions or to discuss additional tax strategies your company can use.