To: All Clients
From: Dope Consulting, Inc.
Subject: Meals & Entertainment
Prior to the Tax Cuts & Job Act, otherwise known as the TCJA, meals and entertainment were 50% – 100% deductible. Now there has been an elimination of tax deductions for business related entertainment and changes to the criteria for fully deductible business meals. i.e. meals that are provided to your employees during a meeting.
Taxpayers made deduct up to 50% of allowable business meal expense if:
- The expense is an ordinary and necessary business expense under Sec. 162(a) paid or incurred during the tax year when carrying on any trade or business;
- The expense is not lavish or extravagant under the circumstances;
- The taxpayer, or an employee of the taxpayer, is present when the food or beverages are furnished;
- The food and beverages are provided to a current or potential business customer, client, consultant, or similar business contact; and
- For food and beverages provided during or at an entertainment activity, they are purchased separately from the entertainment, or the cost of the food and beverages is stated separately from the cost of the entertainment on one or more bills, invoices, or receipts.
Certain expenses remain deductible:
- Meal expenses while traveling on business continue to be 50% deductible.
- Meal and entertainment expenses may be 100% deductible if they’re treated as compensation to employees or income to nonemployees, i.e. reported on their W-2’s
Below are a few examples of what can be deducted and by how much.