The Tax Cut and Jobs Act of 2017 (TCJA) puts stricter limits on what businesses can deduct for meals and entertainment expenses for amounts incurred or paid after December 31, 2017. The Jones & Roth tax team has put together a reference chart as a tool to help you navigate the various changes.
The following table compares the rules before and after the Tax Cuts and Job Act.
|Expense Description||2017 Expenses (Prior Law)||2018 Expenses (New Law)|
|Office holiday parties, picnics, events for employees and customers||100% deductible for portion allocated to employees;
50% deductible for portion allocated to customers
|100% deductible for portion allocated to employees;
portion allocated to customers is nondeductible without additional guidance from Congress or Treasury*
|Employee meals provided for convenience of employer (ex. meals provided by employer for employees working overtime or meals provided at onsite cafeteria)||100% deductible||50% deductible
(nondeductible after 2025)
|Employee meals while traveling away from home overnight||50% deductible||50% deductible|
|Employee meals for required business meeting
(ex. employer-provided lunch during marketing or education meeting)
|50% deductible||50% deductible|
(ex. coffee, soft drinks, bottled water, donuts and similar snacks or beverages)
|100% deductible||50% deductible (nondeductible after 2025), however, does not appear to be what Congress intended. Technical corrections may provide for 100% deductible.|
|Items available to the general public (ex. complementary coffee & snacks in lobby area)||100% deductible||100% deductible|
|Meals expense for attendance of a business league, chamber event, or trade/association meeting||50% deductible||50% deductible|
|Employees (2 or more) working lunch/dinner mtg.||50% deductible||50% deductible|
|Entertaining clients, employees, referrals sources, vendors, etc.
(ex. golf scramble, sporting event tickets, theaters, country clubs, and other purely entertainment related charges that are directly related to taxpayer’s business and can be properly substantiated)
|50% deductible||No deduction for entertainment-related expenses, including meals|
|Entertainment-related meals||50% deductible||No deduction|
|Client/Prospect Business Meals (ex. business owner treats a potential client to lunch and discusses matters directly related to business between the two)||50% if taxpayer is present and not lavish or extravagant||No deduction without additional guidance from Congress or Treasury*|
|Reimbursed meals and entertainment expenses
(ex. business charges its clients fees plus expenses and provides their clients with detail of the expenses on the invoice sufficient for client to determine deductibility of the expense)
|100% deductible provided the taxpayer accounts to such person or business with detail of the expenses on the invoice||100% deductible provided the taxpayer accounts to such person or business with detail of the expenses on the invoice|
*There has been a lot of discussion regarding the question of whether a business meal with a client, prospect, business associate, or referral sources should be treated as nondeductible entertainment or as deductible business meals under the new law. A strict reading of the new law indicates these types of meals are considered “entertainment” and no longer deductible. Most practitioners believe this is not what Congress intended and are waiting on guidance from Congress or Treasury.