Meals & Entertainment Deductions

Meals & Entertainment Deductions

We’ve officially had one filing season under the new tax law, the Tax Cuts & Jobs Act, or TCJA.  Now, we want to share a few reminders of important changes business owners need to remember regarding fringe benefit deductions of meals and entertainment.

Most business owners already know this information, but since these changes can affect a business’s bottom line, it’s worth reiterating.

Meals & Entertainment Deductions

Take a look at the video below for a chart comparing the old and new rules concerning meals and entertainment deductions.

What you will note for meals is the change for  “meals provided for employer convenience” which used to be entirely deductible. Now, all meals are 50% deductible.

The bigger change is that entertainment is no longer deductible. Previously, if an entertainment or meal expense was related to, or associated with the active conduct of doing business, it was at least partially deductible.  Under the new tax law, these expenses are now considered the cost of doing business.

On the other hand, company events for employees such as holiday parties and team-building outings are still fully deductible.

Going Forward

This new law was put in place to eliminate the gray area of whether such expenses are sufficiently business related. For entertainment, the elimination of this deduction will impact business owners who are accustomed to treating clients to outings.  For meals, if you want to deduct 50% of the cost of a meal, you need to keep sufficient documentation.

To get more tips and information for growing your business, please check out the content on our website and social media pages!

 

This video and blog is brought to you by Kirsten Robertson, a staff accountant at hb&k.
Kirsten has been with us since 2016 and is developing her expertise by contributing in both tax and audit departments.