The Tax Cuts and Jobs Act will affect meals and entertainment in 2018

 

One of the most confusing business deductions is the “Meals and Entertainment” deduction. We often hear questions like:

Can you deduct meals for office parties?

Can you deduct meals for employees paid for by the business?

Can we write off meals with new and existing clients?

Are entertainment expenses deductible?

The 2018 Tax Cuts and Jobs Act (TCJA) has changed the rules for how meals and entertainment are treated- and sadly, this will not be beneficial to small business owners and their employees.

Prior to the TCJA, business owners could deduct 50% of business related to meals and entertainment expenses. Meals provided as a benefit to employees were 100% deductible to the business and tax free for the employee. This means that all of those late night pizza runs made while meeting that important deadline was a write off- effectively bringing down the taxable income of the business.

Here are the changes for 2018:

Meals

  • Office Holiday parties: 100% Deductible
  • Business Meals (with clients): 50% Deductible
  • Employee Travel Meals: 50% Deductible
  • Meals provided for convenience of employer: 50% deductible, non deductible after 2025

 

Entertainment

  • No entertainment is deductible

Keep these changes in mind as you round out your budget for 2018. If you were planning on getting a large deduction for entertaining your clients, you may want to think again. Those entertainment expenses will be removed as a line item on your Income Statement, and will not bring any tax advantages starting this year.