Meals & Entertainment Generally Not Deductible starting in 2018


There seems to be a lot of confusion around the deductibility of meals & entertainment starting in 2018. Basically, you are not allowed to deduct entertaining clients. Yes that means no more wining and dining clients or prospects and being able to write off half the cost.

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. See the chart comparing the rules before and after the Act.

Cordasco & Company PC is a boutique CPA firm specializing in federal and state tax issues. We provide customized tax and accounting services specifically designed to help our clients capitalize on the rapidly changing tax and accounting environments.

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