Meals and Entertainment Changes Under the Tax Cuts and Jobs Act

office holiday party

OH NO! Are the HOLIDAY PARTIES still DEDUCTIBLE?
In general, the new Tax Act provides for stricter limits on the deductibility of business meals and entertainment expenses. Under the Act entertainment expenses incurred or paid after December 31, 2017 are nondeductible unless they fall under the specific exceptions in Code Section 274(e).  One of those exceptions is for “expenses for recreation, social, or similar activities primarily for the benefit of the taxpayer’s employees, other than highly compensated employees”  (i.e. office holiday parties are still deductible).

Business meals provided for the convenience of the employer are now only 50% deductible whereas before the Act they were fully deductible. Barring further action by Congress those meals will be nondeductible after 2025.


Businesses should keep the new rules in mind as they plan their 2018 meals and entertainment budgets. 

2018 Expenses – New Rules

  • Office Holiday Parties – 100% deductible
  • Entertaining Clients – Meals 50% deductible / No deduction for entertainment expenses
  • Employee Travel Meals – 50% deductible
  • Meals Provided for Convenience of Employer – 50% deductible (nondeductible after 2025)

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Will Trump Sign the Newly Passed Tax Bill before Christmas as Promised?

Will this still be an early Christmas Gift for the Taxpayers?

new years at white house

Trump may wait until January to sign the tax bill into law.   The reason this may happen is because once this tax bill goes into law it will add to the deficit and when that happens it will trigger a 2010 law known as “PAYGO,” or “pay-as-you-go.”   Once this happens the budget law will require spending cuts to Medicare and other programs.  The reductions would cut spending on Medicare by $25 billion in 2018, according to the Congressional Budget Office.

If Trump signs the tax bill into law in January it would likely defer those spending cuts until 2019,  giving Congress almost a year to come up with a solution.

So what will the Taxpayers get out of the tax saving plan.  Well, let’s see!

In 2018, taxpayers earning less than $25,000 would receive an average tax cut of $60, the nonpartisan Tax Policy Center found.  Those earning between $49,000 and $86,000 would get an average cut of about $900; those earning between $308,000 and $733,000 would receive an average cut of $13,500; and those earning more than $733,000 would receive an average cut of $51,000.

And in 2025 these tax cuts will expire for individuals but the corporations tax cuts will remain permanent.

Happy Holidays Everyone!!!!