Meals and Entertainment Changes for Businesses in 2018
The Tax Cuts and Jobs Act of 2017 (TCJA) places stricter limits on what businesses can deduct as meals and entertainment expense for its employees and clients.
Changes Under The Tax Cuts and Jobs Act of 2017
Businesses and employers need to be aware of the new rules as they plan their 2018 meals and entertainment budgets. Prior to the TCJA, taxpayers generally could deduct 50% of expenses for business-related meals and entertainment. Meals provided to an employee for the convenience of the employer on the employer’s business premises were 100% deductible by the employer and tax-free to the recipient employee.
Under the new law, for amounts paid of incurred after December 31, 2017, deductions for business-related entertainment expenses are disallowed. Meals expense incurred while traveling on business are still 50% deductible, but the 50% disallowance rule will now also apply to meals provided via an on-site cafeteria or otherwise provided on the employer’s premises for the convenience of the employer. After 2025, the cost of meals provided on the employer’s premises will be nondeductible.