Changes to Meals and Entertainment Per the TCJA

As you wrap up your year, it’s important to note how new tax legislation will affect your business. One of the major changes that has taken businesses by surprise is the change in how your business will account for expenses related to entertainment and meals within new framework of the the Tax Cuts and Jobs Act (TCJA). While some things in this category have stayed the same, there are many major differences to note. Here’s a quick breakdown on what to expect.

No Change
For these types of meal and entertainment expenses, expense filings will remain the same:

Fully Deductible (100%)

• Occasional party, picnic, catered meal, or restaurant meal for employees
• Department gatherings, as long as the primary benefactors are employees, not clients or others
• Meals, snacks, or beverages offered to the public as part of an event, class, or other promotional gathering
• Marketing and promotional items that are designed to be given to the public

Partially Deductible (50%)

• Meals for employees or business owners during business travel – the meal must not be lavish or extravagant
• Employee meals during service clubs or business league meetings

New Rules
For these types of meal and entertainment expenses, there are new changes to account for while filing your business taxes. Please be advised of the following new rules:

• Event Tickets are no longer deductible, even if the event is a charitable fundraiser. It also includes things like sporting events, concerts, and any other outing you may have previously deducted. While they were previously deductible on some level before, you will no longer be able to claim them in anyway moving forward.
• Meals with Customers are now only allowed to be deducted at 50% IF actual business is conducted and the taxpayer is present. Documentation of said business proceedings are crucial in order to deduct these meals. The meal must also not be considered lavish or extravagant. If you and your customer are sharing a meal at an entertainment event, you may deduct 50% of the cost of the meal, as long as the cost is separate from the cost of the event and business is being conducted.
• Employee meals during overtime hours are now only allowed to be deducted at a rate of 50%. They used to be fully deductible, but that is no longer the case. Furthermore, after 2025, these meals will no longer be deductible at all.
• Transit or parking passes are no longer allowed to be deducted, unless it is a part of the employee’s overall compensation package.
• On-site restaurant or meal facility bills are no longer fully deductible; you may only deduct them at a rate of 50%. After 2025, these expenses will no longer be deductible at all. The same goes for snacks and beverages provided at the office.
• Membership dues for clubs, social purposes, recreation, or business are no longer deductible. Costs related to business leagues and chambers of commerce will remain deductible, however.

For some businesses, these amendments to meals and entertainment costs per the TCJA can spell major changes for bookkeeping and tax filings. If your business is affected and could use some help navigating these new waters, please don’t hesitate to contact Tally Services. We’re your local Fort Collins bookkeeping and accounting firm, and we’re here to help you file your taxes properly, without the stress and headache of doing it by yourself. Let’s get started!