In the tax reform bill Congress approved last December, entertainment, amusement, or recreation or any expenses with respect to such a facility do not qualify for a tax deduction. Where does this leave “meals”? I have received many questions asking if meals are still deductible.
- Companies’ Holiday Parties: 100% Deductible
Employee Only / Holiday Parties – a bit of good news: it appears as they are still 100% deductible.
- Business Meals in Restaurants: 50% Deductible
Business Meals that are not in an “entertainment” venue are the same as in the past – they remain at 50% deductible. For example, you can still have a business meal in a restaurant and deduct 50% of the expense. A hot dog at the ballpark would not.
- Employee Travel Meals: 50% Deductible
Employee Travel Meals incurred for the convenience of the employer remain 50% deductible as in the past.
- Employer provided meals in employer-operated eating facility: 50% Deductible
Employer provided meals in employer-operated eating facility are still free to the employee; however, only 50% of the costs can now be deducted by the employer. Also, free food provided to employees such as snacks are not supplies and are 50% deductible unless they can be considered de minimis.
- Entertainment expenses: zero deduction
Entertainment expenses that were 50% deductible are no longer deductible. For example, tickets to a concert are not deductible.
As a great deal of business was conducted at “entertainment” facilities such as golf courses, sporting events and the like; businesses will need to decide if the event still creates a positive outcome such as obtaining new clients or retaining existing business. In considering if these events are worthwhile, businesses should remember that corporate tax rates have dropped from 35% to 21%. A businesses may continue to entertain even though entertainment expenses are not tax deductible. Or perhaps they will just go to a restaurant or have the event catered in the office.
At a2zCFO, we are always looking out for small businesses, family offices, and non-profit organizations. We “keep your ship on course” as your navigator. Please call me at (925) 216-5058 or email me at Rolf@a2zCFO.com.