Meal & Entertainment Changes Under Tax Reform
The Tax Cuts & Jobs Act, “TCJA” has established additional limitations and changed the deductibility of certain types of business meals and entertainment expenses, which are incurred or paid after December 31, 2017. Meals and entertainment expenditures must continue to be classified in order to apply the appropriate limitation. These expenditures fall into categories that are not deductible, 50% deductible, and 100% deductible. They are summarized in the chart below for 2017 old rules and the 2018 new rules.
| Event | 2017 Expenses (Old rules) | 2018 Expenses (New rules) |
| Entertainment-Related Meals | 50% deductible | No deduction (e.g., meals incurred when no business is conducted. Food and beverage 50% deductible if separately stated from cost of entertainment on one or more bills, invoices or receipts) |
| Club Memberships | No deduction for club dues; however, 50% deduction for expenses incurred at a club organized for business, pleasure, recreation, or other social purposes if related to an active trade or business | No deduction |
| Sporting Events | 50% deductible for face value of ticket (anything above face value is non-deductible) 50% deductible for skybox expenses to the extent of non-luxury seat ticket face value in such box 100% deductible for charitable sports events 80% deductible for contributions for the right to purchase tickets to an education institution’s athletic events 50% for transportation to/from and parking at sporting events | No deduction No deduction No deduction No deduction No deduction |
| Client Business Meals | 50% deductible | 50% deductible (if the meal is accompanied by entertainment, it must be purchased separately from entertainment or stated on a separate receipt) |
| Meals Provided for the Convenience of Employer | 100% deductible provided they are excludible from employees’ gross income as de minimis fringe benefits; otherwise 50% deductible | 50% deductible (nondeductible after 2025) |
| Event | 2017 Expenses (Old rules) | 2018 Expenses (New rules) |
| Office Snacks | 100% deductible | 50% deductible (nondeductible after 2025) However, does not appear to be what Congress intended. Technical corrections may provide for 100% deductibility |
| Meals During Business Travel | 50% deductible | 50% deductible |
| Meals Excluded in Charitable Sports Package | 100% deductible | 50% deductible |
| Meals in Office During Meetings of Employees, Stockholders, Agents, or Directors | 50% deductible | 50% deductible |
| Meals at a Seminar or Conference, or at a Business League Event | 50% deductible | 50% deductible |
| Meals Provided to Employees Occasionally and Overtime Employee Meals | 100% deductible provided they are excludible from employees’ gross income as de minimis fringe benefits; otherwise 50% deductible | 50% deductible (nondeductible after 2025) |
| Office Holiday party or Other Company Events | 100% deductible | 100% deductible |
| Meals Included in Client Bill as Reimbursed Expenses | 100% deductible | 100% deductible |
| Meals Included as Taxable Compensation to Employee or Independent Contractor | 100% deductible | 100% deductible |
| Meal Expenses Sold to a Client or Customer (or Reimbursed) | 100% deductible | 100% deductible |
| Items Available to the General Public (e.g., Promotional Events) | 100% deductible | 100% deductible |
Nondeductible Items
Some business expenditures remain nondeductible and include:
• Meals with a customer, client or employee without a business purpose
• Club and membership dues for country club, athletic facility, golf course
• Expenses incurred at a club organized for business, pleasure, recreation or other social purpose.
• Lavish or extravagant entertainment expenses
• Entertainment expenses including meals associated with entertainment
50% Deductible Items
These expenses remain subject to the 50% limitation:
• Meal expenses incurred for business meetings for employees, stockholders, agents, and directors
• Most meals incurred during business travel. Travel combined with pleasure or personal must be identified for the meal portion attributed thereof and are not deductible
• Meals incurred at a convention, seminar, or any type of meeting even if the meals are bundled with the costs of the convention. However, they must be reasonably calculated or based on per diem rates for the location of the convention
100% Deductible Items
• Meals expenses that are sold to a client or customer
• Meal expenses for a company picnic or holiday social
• Food made available to the public in connection with a promotional campaign
• Meals included as taxable compensation to the employee or independent subcontractor and included on W-2 statement or Form 1099