The Internal Revenue Service recently issued guidance related to business expense deduction for meals and entertainment following law changes under the Tax Cuts and Jobs Act (TCJA), more specifically Public Law 115-97.
Previously, 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. But, the 2017 TCJA eliminated the deduction for any expenses related to activities generally considered entertainment, amusement or recreation.
Tax Deductible
Under the recent IRS guidance, 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; however, food and beverages that are provided during entertainment events will not be considered entertainment if purchased separately from the event.
The Department of the Treasury and the IRS will publish proposed regulations clarifying when business meal expenses are deductible and what constitutes entertainment. Until those regulations become effective, taxpayers should rely on the interim guidance found in IRS Notice 2018-76 related to these areas of the Act. Other updates regarding the implementation of the TCJA can be found on the IRS.gov Tax Reform page.
Another source of information about the Tax Cuts and Jobs act can be found at the new Intuit® ProConnect Tax Reform Resource Center.