Share:

As a business owner, you may be wondering how the 2017 Tax Cuts and Jobs Act affects your tax preparation. For example, if you take clients out to lunch, is that meal still deductible? In addition to getting advice from a skilled certified public accountant, the following guide can help you understand how the revised tax deduction rules apply to you. 

What Are the IRS Rules for Meals & Entertainment Expenses? 

Meals Deductible at 50% of Cost

If you pick up the tab for a client’s breakfast, lunch, or dinner, the IRS allows you to deduct 50% of the cost. This also includes coffee and other beverage-based outings. However, the business owner or a company employee must always be present with the client at the meal. While the tax law has eliminated the deduction for entertainment expenses, expenses for meals with business clients or contacts paid separately from the entertainment costs continue to be deductible at the 50% limitation. All business meals must also be reasonably priced and not extravagant. Business owners should be prepared to show how the meal is connected to generating income and other benefits for the company.

Other Deductible Meals 

accountantThere are still some exceptions for meal tax deductions. Businesses can still deduct 100% for employee meals during travel and other company-related matters, such as corporate picnics or holiday parties. If a firm provides meals to the general public as part of marketing or promotional efforts, these expenses are also 100% deductible. However, food and beverages provided to employees at an on-site cafeteria are only 50% deductible unless the meals are specifically tied to a recreational event. If you are unsure if a meal is deductible or not, ask your accountant for clarity.    

Non-Deductible Entertainment

For the most part, entertainment expenses, such as golf outings or sporting events, are no longer tax-deductible. The only exceptions are costs incurred to benefit a company’s employees, such as a team-building excursion. Other eligible entertainment activities include compensation expenses and products or services sold to the public. These are still 100% deductible. Your accountant can help you determine whether an expense will qualify for a tax deduction or not. 

 

For 19 years, the office of Donna J. Troutman, CPA, PC in Lewisburg, PA, has helped clients understand tax law changes and how they affect their individual and business tax returns. The locally-owned firm works with a wide range of companies and individuals. From personalized attention to impeccable accuracy, you can count on their team of accountants for confidentiality and friendly service. To schedule a consultation, call (570) 523-7337. Visit the website for their complete listing of available services.  

tracking