Meals & Entertainment

As many have heard, the new Tax Cuts & Jobs Act provides stricter limits on the deductions of business meals and entertainment expenses. Under these new regulations entertainment expenses incurred or paid after December 31, 2017 are nondeductible unless they fall under the specific exceptions of Code Section 274(e). One of those exceptions is the office holiday party for the benefit of the taxpayer’s employees, other than highly compensated employees. Business meals provided for the convenience of the employer are now only 50% deductible, whereas before the act they were fully deductible. Barring further action by Congress, those meals will be nondeductible after 2025.

Businesses should keep the new rules in mind as they plan their 2018 meals and entertainment budgets. Care should be taken in accounting for and tracking these expenses to be incompliance with the new regulations. See below for a chart comparing the deductibility rules before and after the Act for some of the more common types of expenditures:

Type of EventOld Law
(2017 Rule)
New Law
(New Rule)
Office Holiday Party or Picnic100% deductible100% deductible
Client Business Meals50% deductible50% deductible
Entertainment-related Meals
50% deductibleNo Deduction
Transportation to/from Restaurant for Client Business Meal100% deductible100% deductible
Sporting Event Tickets50% deductible for face value of ticketNo Deduction
Club MembershipsNo DeductionNo Deduction
Meals Provided for the Convenience of Employer100% deductible50% deductible
(nondeductible after 2025)
Meals Provided to Employees Occasionally and Overtime Employee Meals100% deductible50% deductible
(nondeductible after 2025)
Water, Coffee, and Snacks at the Office100% deductible50% deductible
(nondeductible after 2025)
Meals During Business Travel50% deductible50% deductible
Meals at a Seminar or Conference, or at a Business League Event50% deductible50% deductible
Golf Sponsorships and OutingsMeals and Golf 50% deductibleMeals and golf are
nondeductible

Congress has not completely done away with the business lunch.  However, tax professionals and organizations are asking on behalf of taxpayers for additional guidance from the Department of the Treasury and the Internal Revenue Service in order to comply with the changes on their 2018 tax returns and financial statements.  If you have any specific questions regarding the new rules under please contact us.

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