I don’t know about other tax professionals but the Tax Cuts and Jobs Act (TCJA) gave me a run for my money during the holiday season last year as I tried to get up to speed on all the tax changes. Some parts of the TCJA left me still scratching my head about what was and was not deductible, especially business meals. Under TCJA the 50% deduction for entertainment went away so that golf or basketball game with clients got a little more expensive.
The IRS has thankfully provided some additional guidance about meals specifically. If you would like to read the release, it can be found here. The highlights:
- Business meals can still be 50% tax deductible if the taxpayer or employee of the taxpayer is present, the cost is not considered lavish or extravagant, and as with all business expenses must be ordinary and necessary for the business.
- Meals with current or potential customers, consultants, etc. fall under that 50% deduction.
- If you play a round of golf with a potential customer and then go to the restaurant for a meal, the cost of the round of golf is still non-deductible but the meal is 50% deductible.
- If you go to a basketball game with a consultant with the price of admission including a meal voucher, no part of the ticket cost is deductible.
- Meals while travelling were never off the table so they are still 50% deductible.