Business Expense Deductions for Meals, Entertainment

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Any bookkeeping, business or tax article contained in this communication, including attachments and enclosures, is not intended as a thorough, in-depth analysis of specific issues, nor a substitute for a formal opinion, nor can it be used to avoid tax-related penalties. If desired, we would be pleased to perform the requisite research and provide you with a detailed written analysis. Such an engagement may be the subject of a separate engagement letter that would define the scope and limits of the desired consultation services.

As the end of the year approaches, taxpayers should be reminded that business expense deduction for meals and entertainment have changed due to tax law changes in the Tax Cuts and Jobs Act (TCJA) of 2017. Until proposed regulations clarifying when business meal expenses are deductible and what constitutes entertainment are in effect, taxpayers should rely on transitional guidance that was issued by the IRS late last year.

Prior to 2018, a business could deduct up to 50 percent of entertainment expenses directly related to the active conduct of a trade or business or, if incurred immediately before or after a bona fide business discussion, associated with the active conduct of a trade or business. However, the TCJA eliminated the deduction for any expenses related to activities generally considered entertainment, amusement or recreation.

Taxpayers may continue to deduct 50 percent of the cost of business meals if the taxpayer (or an employee of the taxpayer) is present and the food or beverages are not considered lavish or extravagant. The meals may be provided to a current or potential business customer, client, consultant or similar business contact.

Please note that food and beverages that are provided during entertainment events will not be considered entertainment if purchased separately from the even and the cost is stated separately from the entertainment on one or more bills, invoices or receipts.

For more information about Deductions for Meals, view our infograph below:

Tax Deductions for Meals 2019

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