FF&F News & Events

IRS Issues Guidance on Tax Cuts & Jobs Act’s Changes to Business Expense Deductions for Meals & Entertainment

The IRS has issued guidance on the business expense deduction for meals and entertainment following the law changes in the Tax Cuts and Jobs Act (TCJA). *Please note that this is follow-up to our original May 24, 2018 blog post on meal, travel & entertainment business deductions, the details of which have not changed. This update is meant simply to announce the fact that the IRS has released its guidance on the matter.

Prior to 2018, a business could deduct up to 50% of entertainment expenses directly related to the active conduct of a trade or business. However, the 2017 TCJA legislation has eliminated the deduction for any expenses related to activities generally considered entertainment, amusement or recreation.

Taxpayers may continue to deduct 50% of the cost of business meals if the taxpayer (or an employee of the taxpayer) is present and the food or beverages are not considered “lavish or extravagant.” The meals may be provided to a current or potential business customer, client, consultant or similar business contact. Food and beverages that are provided during entertainment events are not considered entertainment if purchased separately from the event.

It is important for business owners and professionals to take this new change to meals and entertainment expenses into account, particularly if they have historically grouped both accounts together in their books. It would be wise to thoroughly track business meals in a separate account from business entertainment expenses, as it would help save time when tax preparation season comes.

For further detail regarding the deductibility of expenses for certain business meals and entertainment, please refer to §274 of the Internal Revenue Code. For additional transitional guidance for the TCJA amendments to §274, please refer to IRS Notice 2018‐76. To read about this year’s changes to qualified business deductions for meals, travel and entertainment, please refer to our earlier blog post: Business Deductions Under the new Tax Law: Meals, Travel & Entertainment.

We will continue to monitor updates regarding all relevant changes to TCJA. We encourage you to contact us with any questions or concerns you may have related to these changes and how they might affect you specifically. For such inquiries, or for information about our services, please contact us at info@fffcpas.com or (212) 245-5900.