IRS issues guidance on changes in Employment Law and Tax Reduction deductions for business expenses for meals, entertainment
WASHINGTON – The Internal Revenue Service, IRS today issued guidelines on the deduction of business expenses for meals and entertainment, after changes in Employment Law and Tax Reduction (TCJA).
The TCJA 2017, eliminated the deduction for any expenses related to activities generally considered entertainment, amusement or recreation.
Taxpayers can continue deducting 50 percent of the cost of business meals if the taxpayer (or an employee of the taxpayer) is present and food or drinks are not considered lavish or extravagant. Meals can be provided to a commercial prospect, customer, consultant or business contact like.
Food and beverages are purchased or consumed during entertainment events will not be considered entertainment if purchased separately from the event.
Before 2018, a company could deduct up to 50 percent of entertainment expenses directly related to the active conduct of a trade or business or incurred immediately before or after a substantial business discussion and in good faith.
The Treasury Department and the IRS expect to publish the proposed regulations to clarify when food business expenses are deductible and what constitutes entertainment. Until the proposed regulations are effective, taxpayers may rely on the guidelines of Notice 2018-76 (in English).
You can find updates on the implementation of the TCJA on page Tax Reformof IRS.gov.