Archive for January, 2018

Business Meals & Entertainment Expenses under the New Tax Law

The New Tax Law Takes a Huge Bite out of

Business Meals & Entertainment Expense Deduction –

Effective January 1, 2018!

Previously, a taxpayer could deduct 50% of business meals and entertainment.

The New Tax Law effectively would serve to disallow business meals and entertainment expenses!

 

It’s So Hard to Say Good-Bye to Yesterday…

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Breaking it down a little more –>

BUSINESS RELATED – NOT DEDUCTIBLE

Entertainment. Employer tax deductions for business entertainment expenses are removed by the new tax law.  Bye Bye deduction for dues to social, athletic or sporting clubs — even if the membership is used primarily in furtherance of the taxpayer’s business. That also means no deduction for luxury boxes at stadiums/arenas, theatre and concert tickets, or hosting golf outings.

In general, the 50% employer tax deductions for business entertainment expenses are removed.

Business meals. Bye bye deductible power lunches! Employer tax deductions for business meals are removed by the new tax law, with a temporary exception.

Exception – business meals will be deductible up to 50% (previously 100%) if provided through an in-house cafeteria or meals, or if provided as a de-minimis fringe benefit by the employer for the convenience of the employer, until 2025 when that deduction goes away entirely as well.

EMPLOYEE RELATED – DEDUCTIBLE

Business meal and entertainment expenses remain deductible if incurred for recreational, social, or similar activities (including facilities, but not club, dues) primarily for the benefit of employees (except those employees that are highly compensated); e.g., an office holiday party and meals employees consume while traveling for work.

Said anther way, employee related business meals remain 50% deductible and recreational and social employee expenses remain 100% deductible.

Employees can still exclude the benefit of employee meals from income.

The Joint Committee on Taxation estimates the change will bring in $23.5 billion in tax revenue over the next decade.

PLANNING POINTER – Over time there will be technical corrections and clarifications, but for now it is important to focus on appropriately classifying deductions as advertising (e.g., sponsorship of an event) vs. entertainment and tracking what expenses are travel meals of employees (partially deductible) vs. entertainment (non-deductible).

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