To: All Clients
From: GJR Consulting, Inc.
Subject: Meals & Entertainment
Prior to the Tax Cuts & Job Act, otherwise known as the TCJA, meals and entertainment were 50% – 100% deductible. Now there has been an elimination of tax deductions for business related entertainment and changes to the criteria for fully deductible business meals. i.e. meals that are provided to your employees during a meeting.
Taxpayers made deduct up to 50% of allowable business meal expense if:
- The expense is an ordinary and necessary business expense under Sec. 162(a) paid or incurred during the tax year when carrying on any trade or business;
- The expense is not lavish or extravagant under the circumstances;
- The taxpayer, or an employee of the taxpayer, is present when the food or beverages are furnished;
- The food and beverages are provided to a current or potential business customer, client, consultant, or similar business contact; and
- For food and beverages provided during or at an entertainment activity, they are purchased separately from the entertainment, or the cost of the food and beverages is stated separately from the cost of the entertainment on one or more bills, invoices, or receipts.
Certain expenses remain deductible:
- Meal expenses while traveling on business continue to be 50% deductible.
- Meal and entertainment expenses may be 100% deductible if they’re treated as compensation to employees or income to nonemployees, i.e. reported on their W-2’s
Below are a few examples of what can be deducted and by how much.
Examples
| Holiday picnic or Christmas party | 100% deductible |
| Food available to the public for free | 100% deductible |
| Food included as taxable compensation to the employee or independent contractor and included on the W-2 or Form 1099 | 100% deductible |
| Meals expenses that are sold to a client or customer | 100% deductible |
| Meals for business meetings of employees, stockholders, agents, and directors | 50% deductible |
| Any meals during business travel | 50% deductible |
| Meals at a convention, seminar, or any type of meeting, even if the meals cost is not separately stated from the cost of the event | 50% deductible |
| Meals related to business, such as clients, customers, and vendors, provided that there is a business purpose or some benefit to the business | 50% deductible |
| Meals provided on the employer’s premise to more than half of the employees for the convenience of the employer, and meals provided occasionally to employees to enable them to work late, work weekends, or otherwise work overtime | 50% deductible |
| Office snacks (coffee, soft drinks, bottled water, donuts, and similar snacks or beverages) provided to employees on the business premises | 50% deductible |
| Meals provided as part of a package involving a charitable sports ticket | 50% deductible |