Back to top

Blog

Click here to go back

Business Meals & Entertainment

Posted by Admin Posted on Feb 16 2018


The new Tax Act nails down some stricter guidelines pertaining to the deductibility of business meals and entertainment expenses. Below is a summary of how the deductibility rules will change:


Expenses primarily for the benefit of the taxpayer's employees:
(Example: Office Holiday Parties)

Old Rules

-
100% deductible

New Rules

-
Still 100% deductible  
   


Expenses primarily for the benefit of clients:
(Example: Event Tickets)


Old Rules 

50% deductible (tickets to charitable events were 100% deductible)  

New Rules


No deduction for client entertainment expenses


Business Meals 
(Example: Employee Travel Meals)


Old Rules

- 50% Deductible

New Rules


- 50% Deductible


Meals Provided for Convenience of Employer
(Example: Meal served to employees for working late on the business premises)

Old Rules

100% deductible

New Rules

50% deductilbe (nondeductible after 2025)


Understanding the new rules and updating your books accordingly will be key when projecting your taxable income in 2018. Our firm suggests establishing three (3) separate sub-accounts for expenses relating to meals and entertainment: 

1) 100% deductible (i.e. holiday office party, etc.)

2) 50% deductible (i.e. employee meals when traveling, etc.)

3) Nondeductible (i.e. taking a client to a sporting event, etc.)


Tracking all of these expenses will still be essential for business owners to measure profitability and cashflow, however the different categories will help them understand how each transaction affects their taxable bottom line.

We may be in the thick of preparing 2017 taxes, but clients should be sure to start tracking these 2018 expenses efficiently! Call our office if you need assistance mapping your chart of accounts! 

Add New Comment