In tax reform bill from Congress, what business meals are and are not deductible for a tax deduction? Rolf Neuweiler A2ZCFO (image: business lunch)

New Tax Law – Are “Meals” and “Entertainment” Still Deductible?

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.

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