The Pandemic Relief Bill signed by President Trump, in December 27, 2020, was intended to give tax relief to restaurants and to help stimulate the restaurant/hospitality industry. As originally interpreted, it did not benefit the owner-operator. Recent changes by the Internal Revenue Service has changed that and have greatly simplified the per diem deductions.
In past years, an owner-operator did not get the full deductions for meals purchased at a restaurant. Meal purchases were only 80% deductible. With the IRS interpretation, owner-operators will get the full 100% deduction with the new bonus per diem deductions that allows them only to have to keep logbook, settlements, and proof of time spent on the road. This will be in effect for tax years 2021 through 2022.
What does this actually mean? Assume owner-operator spends 300 per diem days on the road for 2021 and can substantiate that with their logbooks. Using per diem rates in effect for 2021, $66 a day from January 1 to September 1 and $69 a day from October 1 to the end of the year, the owner-operator would calculate the per diem meal deduction as $20,025. This would be fully deductible for 2021. Under prior rules this would have been a deduction of $16,020. A savings of $4,005 in taxable income.
A much needed benefit for all those that have kept America rolling throughout the COVID-19 pandemic. Please be sure to consult with your tax preparer to insure maximizing this deduction.