Three-Martini Business Lunch Can Be Fully Written Off

Business meals—including beverages—will be 100% tax deductible for the next two years to help resurrect a restaurant industry decimated by the pandemic. That is just one of the many tax provisions included in the $900 billion COVID-19 relief package signed into law in late December 2020, highlighted here.

• The percentage-limit rules for taxpayers making cash contributions to public charities (not a Donor Advised Fund) allowed up to 100% of Adjusted Gross Income. This was originally implemented with the CARES Act for 2020 and now is extended through 2021.
• The medical expense deduction floor was adjusted back to 7.5% of adjusted gross income from 10%.
• In 2021 the qualified tuition-expense deduction is repealed, but the lifetime-learning credit has an increased income limitation so more taxpayers will qualify.
• The non-business energy property credit for qualified energy improvements to a taxpayer’s principal residence was extended through 2021.
• The treatment of mortgage insurance premiums as qualified residence interest is extended through 2021.
• A refundable tax credit in the amount of $600 per eligible family member. The credit phases out starting at $75,000 of modified adjusted gross income ($112,500 for heads of household and $150,000 for married taxpayers filing jointly) at a rate of $5 for every additional $100 of income. Checks are being issued based on a taxpayer’s 2019 tax return. If the amount of the credit that is determined on the 2020 tax return filing is greater than the advanced payment received, then the taxpayer will receive the difference as a refundable credit.
• For non-itemizing taxpayers, there is a $300 allowance for a charitable contribution deduction in 2021. This extends the similar allowance in 2020 but increases it to $300 per taxpayer so that a married couple could deduct $600 collectively. In 2020 a married couple was limited to $300.