Many of the finer points of the Tax Cuts & Jobs Act are still being ironed out, with final clarification not expected until tax season begins late January 2019.
One of the favorite deductions for businesses, Meals & Entertainment, is undergoing some significant changes. Since the new tax law was introduced I have read many articles on this subject and they all read a little differently and there’s a lot of gray area.
The clearest way that I can explain the new law in regards to Meal & Entertainment is:
No deductions for anything to do with clients. That’s right, no meals, no entertainment, no box suites at the Superdome, nothing.
On the other hand, for employees, pretty much everything food-related can be deducted -- including parties, meals, snacks, social and recreational events and travel meals.
At a recent IRS Tax Forum I attended, a representative of the IRS said to a conference room of over 500 people, “ have an employee picnic everyday”, which drew laughter, which was then followed by, “I’m not joking.”
So, the short answer – if it is meals with employees, it’s deductible; with clients, it is not. If it’s entertainment with employees, some are deductible, i.e. softball games, picnics, etc.; entertainment for clients, no longer deductible. Obviously this is an oversimplification, but that is how the law reads (today). Stay tuned.