Are Meals and Entertainment Deductible?
One of the biggest questions with all the new tax laws are “what is still deductible?”. With the Tax Cuts and Jobs Act of 2017 there were a lot of changes. One significant change pertains to meals and entertainment. Prior to 2018, 50% of meals and entertainment were deductible unless there was a specific exception that would make them 100% deductible. However, it’s not that clear cut anymore.
Below are some of the changes that have been made:
- No deductions for entertaining clients.
- Meals for clients are still 50% deductible.
- Meals for employees traveling are still 50% deductible.
- Meals for employer convenience are now 50% deductible. These are meals provided to employees on the business premises. (This will become non-deductible in 2025).
- Office Holiday parties are still 100% deductible.
As always there are exceptions. Meals and entertainment are still fully deductible if provided for a community event, or if proceeds from the event will go to a charitable organization. Also, if it’s necessary for your job. For example, if you’re a sports reporter and you need to go to a sporting event, that would be fully deductible.
The IRS has issued guidelines on deducting your meals. The meal must be “ordinary and necessary”, the cost may not be “lavish or extravagant”, a company employee must be present, and if the meal is at an entertainment venue, the meal must be a seperate cost that can be seen on the receipt. It’s important to keep all your receipts organized and label what they are for. Most importantly, if you have any questions you can ask your accounting team!