The Tax Cuts and Jobs Act of 2017 made many significant—and often complex—changes to the deductibility of business meals and entertainment starting in 2018. To help our clients better understand the new law, we summarized the most important changes to be aware of when preparing to deduct meals and entertainment expenses for your business:
Meals are 50% deductible. Entertainment is 0% deductible.
Meals with clients are 50% deductible and should be classified as meals.
Meals with coworkers are 50% deductible only if business is discussed and they are classified as meals. If no business is discussed, classify as entertainment.
Company outings, parties, birthday and anniversary celebrations, picnics etc. are fully deductible and should be classified as meals-celebratory.
Entertainment such as tickets to not-for-profit, high school or college sporting events; skyboxes for sporting events; transportation to/from sporting events; and cover charge, taxes, tips, and parking for entertainment events are 0% deductible and should be classified as entertainment.
Membership dues and fees to including country clubs, hotel clubs, sporting clubs, airline clubs, and clubs operated to provide meals under circumstances generally considered to be conducive to business discussions are 0% deductible and classified as nondeductible dues. Exceptions to this are board of trade, business leagues, chambers of commerce, civic or public service organizations, professional organizations such as bar & CPA associations, and trade organizations.
Need help understanding how the new laws on deductions will affect your business? Give us a call today at 443-605-3167 to setup a free consultation.