Tax Reform: What it Means for Businesses – Meals & Entertainment Deductions
This week we review changes made to the deductibility of meals & entertainment expenses.
Entertainment is defined as any activity that is of a type generally considered to constitute entertainment, amusement or recreation, including entertainment at theaters, clubs, lounges and sporting events.
Beginning in 2018, deductions are eliminated for most entertainment expenses regardless of whether the expenses are related to or associated with the active conduct of the taxpayer’s trade or business. Under prior law, these expenses were 50% deductible.
Entertainment expenses that are treated as compensation to an employee are still fully deductible. Also, expenses for recreational, social or similar activities primarily for the benefit of employees continue to be fully deductible.
The new tax law has created some confusion about the deductibility of business meals. Business meals remain 50% deductible if the following conditions are met:
An additional condition must now be met when meal expenses are coupled with entertainment:
De minimis Meals
Under prior law, expenses incurred by an employer for food and beverages provided to employees as a de minimis fringe benefit (e.g. coffee, donuts, occasional overtime meals etc.) were 100% deductible.
Beginning in 2018, these expenses are now only 50% deductible.
Have questions about how these changes will impact your business tax deductions? Give BMM a call.