Meals and Entertainment Deductions: What’s Changed with the New Tax Law

Meals and Entertainment Deductions| FusePhase Accounting

Well, folks, it’s tax time once again, and this year’s a doozy, thanks to all of the changes that came with the Tax Cuts and Jobs Act of 2017. One of the biggest changes causing some confusion has to do with the meals and entertainment deductions that a business can claim.

As of January 1, 2018, businesses face stricter restrictions when it comes to how they entertain clients, feed their employees, or throw company parties. Make sure you understand how these changes will impact your business and work with your accountant to maximize all of the options available. And don’t worry, we’re here to help you make sense of it all.

Changes to meals & entertainment deductions

Entertainment expenses are not deductible

Gone are the good old days when you could treat your clients to backstage passes or courtside seats and write off 50% of the expense from your taxes. Starting with your 2018 tax return, client entertainment expenses are not deductible at all.

Starting with your 2018 tax return, client entertainment expenses are not deductible at all. Click To Tweet

Some meals are deductible, but not all

Meals are still deductible to some extent, but this depends on the nature of the meal.

On-site meals for employees – such as catered lunches, office meals and snacks, and meals for company meetings – are still deductible but only 50% instead of 100%. Your holiday parties or company events for your employees are still 100% deductible, but not if the event is primarily for clients (even if some of your employees attend).

As for travel meals for your employees, those expenses are still 50% deductible, just like before.

You can also still deduct 50% of client meals but they must be purchased separately from any entertainment expenses. For example, if you host a party for current or prospective clients, you couldn’t deduct the expenses related to booking the venue, but you could deduct 50% of the appetizers and bar expenses – you’d just need to ask for a separate bill with food and beverage costs only.

A summary of what’s changed and what hasn’t

Is your head spinning yet? No worries – we’ve put together a handy cheat sheet for you below that breaks down current meals and entertainment deductions compared to what was allowed in 2017 and prior.

meals and entertainment deductions with new tax law

Remember to stay on top of all of your business expenses throughout the year so tax season doesn’t have to be so painful for you and your business. You can find more tips to help you ease your tax headache here.

Still have questions? You can refer to the Tax Reform page of the IRS website, or feel free to reach out to us.

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