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Business Meals and Entertainment Expenses – What’s Still Deductible?

Posted by Jenna Mueller Posted on Feb 12 2020

The 2017 Tax Cuts and Jobs Act (TCJA) changed business deductions related to meals and entertainment expenditures. Our office has received several questions over the past year regarding what expenditures are still deductible under the new law.

 

Prior to TCJA, businesses were generally able to deduct 50 percent of the cost of meals and entertainment expenditures that were directly related to the taxpayer’s business. Under the new law, these business expenditures are subject to the following limitations:

 

  • Entertainment expenses and membership dues to social or recreational clubs are generally no longer deductible, unless they are primarily for the benefit of employees (such as a holiday party or summer picnic).

 

  • Business meals are generally 50 percent deductible, so long as an employee is present, and the expense is not considered lavish or extravagant.
    • Prior to TCJA, a 100 percent deduction was allowed for food and beverage furnished to employees on the business premises - these are now subject to the 50 percent limit.
    • Food or beverage made available to the public for free is fully deductible.

 

We recommend that you update your chart of accounts to separately track each category of expense. You should also keep adequate receipts and records to prove your expenses. These records should show the date, amount of the expense, location, and number of people present.

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