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Congress wants business owners to go to restaurants and claim a full tax deduction for them.
Whether it will be enough to save controversial dining options is a different story, according to financial advisers and tax professionals.
The $ 900 billion proposal, released Monday and weighing 5,593 pages, includes a series of measures to help Americans get through the pandemic.
The measure includes $ 600 adult and child incentive checks, as well as a $ 300 weekly unemployment rate hike.
The legislation also encourages entrepreneurs to help support restaurants by visiting them often.
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Indeed, the bill calls for a “temporary reimbursement of full deductions for business meals,” and it applies to the cost of food or drink provided by a restaurant and paid or incurred in 2021 and 2022.
“As you know, the president is concerned about restaurants, so we’ve restored meal expense deductions for businessmen,” Treasury Secretary Steven Mnuchin said Monday morning on CNBC’s “Squawk on the Street.”
Currently there is a 50% deduction that is allowed for meals and snacks at work, as well as meals for customers when business is in progress.
If the size sounds familiar to you, it’s probably because you’ve seen it before. The HEALS Act, an earlier emergency bill from the Senate, called for a temporary 100% deduction on business meals.
That measure was defended by Senator Tim Scott, RS.C., and was known as the Supporting America’s Restaurant Workers Act.
“It’s great for small businesses and restaurants; they really need that shot in the arm,” said Michael Goodman, a certified financial planner and CPA with Wealthstream Advisors in New York.
“Unfortunately, it is not going to help now as it is for 2021 and 2022,” he said. “It won’t do anything for those restaurants that have to go out of business.”
Restaurants that take blows
The proposal came about at a difficult time for the hospitality industry. Restaurants lost 17,400 jobs in November.
Meanwhile, municipalities are locking themselves up due to a resurgence of Covid cases.
That means indoor dining is illegal in New York City, while outdoor seating in Los Angeles County restaurants and breweries is closed to the public.
Tax professionals are also skeptical about whether business owners want to risk eating out – especially at a time when their own finances are already suffering.
“The three-martinis 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, California.
“It’s great for rich people who can blow 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.”