Tax Law Changes: New Meals & Entertainment Rules

Tax Law Changes: New Meals & Entertainment Rules

Did you know there are changes to the Meals & Entertainment Rules for business?

Under the new TCJA tax law, entertainment, amusement, or recreation expenses for clients and business associates  are no longer allowed as a business deduction?

Overview

The TCJA has changed the rules for deductions relating to entertainment expenses for clients. Starting January 1, 2018 entertainment, amusement, or recreation expenses for clients and business associates will no longer be a deductible expense. For example, monies spent to bring a client to a sporting event, concert, golf outing, etc. are no longer deductible, although the food and beverage costs that are separately stated from the entertainment are still entitled to the 50% deduction. The TCJA did not change the rule relating to expenses for recreational activities
primarily for the benefit of their employees (i.e. Holiday parties, annual picnic, etc.). These expenses are exempt from the entertainment disallowance rules, and are still 100% deductible. The rules regarding business meals are unchanged as well, and are still entitled to the 50% deduction. Because of this change in the law, there is now a great need to track meals separate from entertainment on your chart of accounts. The generic “Meals & Entertainment” account will now need to be broken out in order to receive the correct deduction.

If you have any tax questions, contact our office today.