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‘Three martini lunch’ tax break may not save many restaurants, advisers say

Congress wants business owners to go to restaurants and demand a full tax deduction for doing so.

Whether that is enough to save ailing restaurant establishments is another story, financial advisers and tax experts have said.

The $ 900 billion proposal, which was released Monday and weighs 5,593 pages, includes a range of relief measures designed to help Americans weather the pandemic.

The measure includes stimulus checks of $ 600 for adults and children, as well as a weekly increase in unemployment of $ 300.

The legislation also encourages business owners to help restaurants by visiting them often.

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Indeed, the bill provides for a “temporary full deduction allowance for business meals”, and it applies to the cost of food or beverages provided by a restaurant and paid or incurred in 2021 and 2022.

“As you know the President is concerned about restaurants, so we have reinstated the deductibility of meal expenses for businessmen,” Treasury Secretary Steven Mnuchin said, speaking on “Squawk on the Street “from CNBC Monday morning.

Currently, a 50% deduction is allowed for meals and snacks at work, as well as for customer meals if business is conducted.

If the measurement sounds familiar to you, it’s probably because you’ve seen it before. The HEALS Act, an earlier Senate relief proposal, provided for a temporary 100% deduction on business meals.

This measure was championed by Senator Tim Scott, RS.C., and it was known as the Supporting America’s Restaurant Workers Act.

“It’s great for small businesses and restaurants; they really need a boost, ”said Michael Goodman, Certified Financial Planner and CPA at Wealthstream Advisors in New York City.

“Unfortunately, that’s not going to help at the moment, since it’s for 2021 and 2022,” he said. “It will do nothing for restaurants that will have to close their doors.”

Restaurants take hits

The proposal comes at a difficult time for the hospitality industry. Restaurants lost 17,400 jobs in November.

Meanwhile, municipalities are closing amid a resurgence of Covid cases.

This means indoor dining is banned in New York City, while outdoor dining and brewery seating is closed to the public in Los Angeles County.

Tax practitioners are also skeptical about whether business owners want to risk dining out, especially at a time when their own finances are already suffering.

“The three martini lunch is a great idea in theory, but you assume people have money to spend,” said CFP Dan Herron, CPA and director of Elemental Wealth Advisors in San Luis Obispo, Calif. .

“It’s great for rich people who can spend money through a business, but I know people who are struggling to make ends meet,” he said. “Their priority is not a three-martini lunch.”

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