Meals and Entertainment Changes Under the Tax Cuts and Jobs Act

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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