Trumps tax changes to the Meals & Entertainment Deduction for Business Owners

Three-quarters of the way into tax season, we have noted both some positive and not so positive things about the new 2018 “Tax Cuts and Jobs Act”.  Therefore, we will be posting about some of these changes as we move along into 2018 for our clients to be aware of, and one key area of change for business owners will be the ability to deduct meals & entertainment next year.  These changes are important to note and can increase your bottom line for tax purposes.

A recent article on the web by Hertzbach CPA lays out a chart showing the change.  Click here to see the chart

You will notice there are four categories to understand within entertainment expenses.   First, throwing an office holiday party is still 100% deductible.  Can an owner declare that everyday is a holiday at the office and deduct 100% of their costs?   Will business owners will be hosting a lot of holiday parties this year? March 23rd is National Puppy Day.  Party anyone?  What do you think?

The second category, business meals, is also unchanged and remains 50% deductible.

Now for the changes.  The third category, entertaining clients, was previously 50% deductible; it is now not deductible at all under the new tax act.

The fourth category that changed is meals provided for convenience
of employer.  Meals provided for convenience was an old provision that allowed employers to deduct 100% of the cost of meals for employees provided in the work place.   During tax season, many tax firms provided food to employees after hours due to the long work days.  The new tax code now allows it at 50%.   It is unclear what the reasoning was behind it, but if you have an idea, please write it in the comments area below.

It will be interesting to see how these new entertainment provisions affect business owners decisions and change the way companies entertain.  

Have a great March 17th, 2018 and be safe out there this weekend.  Please do not drink and drive, call a friend.

 

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