Meal and Entertainment deduction under the new tax laws for 2019

So many changes under the new Tax Cuts & Jobs Act laws took effect last year, and not all of them are good news for entrepreneurs! One of the biggest changes for small business owners is the elimination of most business meal  and entertainment deductions. But there are some notable exceptions, and savvy business owners will familiarize themselves with them to claim the deductions they can. From a sports game with clients to a company-wide lunch, we will walk you through the new rules and the tricky scenarios to keep in mind so that you can save big on your tax return.   

You must be curious about how much and which items you can still deduct under the new tax law.

Here are the new rules:

If you need more clarification on the difference between business meals and entertainment, here are the four factors to determine if the expenses are business meals but NOT entertainment:

1.       Reasonable expectation of deriving income or business benefits from the meeting

2.       The meals are not lavish

3.       Incurred in a restaurant that is NOT an entertainment venue such as a night club or sports arena

4.       The meal must take place between the company and a client or prospective client

Keep in mind, under the new tax law, entertainment is not tax deductible, while business meals are 50% tax deductible.

Here are some common examples of 100% deductible expenses:

1.       Meals for employees at the company

2.       Food and drinks provided to the public free of charge

3.       Company parties

Here are some common examples of 50% deductible expenses:

1.       Taking clients out for meals that are not lavish

2.       Travel meals for work

Here are examples of nondeductible business meal and entertainment expenses:

1.       Sports game tickets

2.       Concert tickets

3.       Paying for clients’ night out without company presence

Takeaways:

The general rules are meals associated with the business are 50% tax deductible and any kind of entertainment expenses are no longer tax deductible.

We hope this article provides a clear view on which expenses and how much your business can deduct under the new tax law. As always, drop us a line if you have any questions. We are always happy to hear from you!