Employer’s Meals and Entertainment Expenses Under the Tax Cuts and Jobs Act

The new tax laws mean some big changes to how business can take certain deductions. Here are a few of the changes for 2018.

Entertainment Expenses

1) Under the old law 50% of entertainment expenses were allowed if they were “ordinary, necessary and directly related to the taxpayer’s trade or business”.

2) Under the new law entertainment expenses such as tickets to sporting events are no longer deductible even if business was conducted at the event.

3) Meal expenses at an entertainment event will be 50% deductible assuming there was valid business discussed.

Meal Expenses

1) Meal expenses remain 50% deductible.

2) Meals provided for the benefit of the employer previously were 100% deductible but will now be 50% deductible until after 2025 when they will become nondeductible.

Office Parties

1) Holiday parties and recreational, social, or similar activities primarily for the benefit of employees are 100% deductible.

Following are Some Exceptions

1) Most expenses that are treated as compensation to an employee of the taxpayer are 100% deductible.

2) Expenses for goods, services, and facilities made available by the taxpayer to the public are 100% deductible.

3) Expenses that are directly related to business meetings of employees, stockholders, agents, or directors are 100% deductible.

4) Expenses directly related and necessary to attendance at a business meeting or convention of certain organizations (business leagues, chambers of commerce, real estate boards, and boards of trade) are 100% deductible.

If you have questions about the new tax law please contact us. We can go over your entertainment and meal expenses and let you know the impact on your tax liability.

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