Meals & Entertainment Deductions 2018 The Tax Cut and Jobs Act

July 30th, 2018

Businesses must continue to account for meals and entertainment expenses by classification in order to apply the appropriate limitation. For 2018 there is a new category for "entertainment meals". Because entertainment-related meals are now treated differently from client business meals, it may be necessary to establish new documentation procedures in order to account for each separate category of meals (50%, 100%, or non-deductible meals). We recommend the "who, what, where, when and why" documentation policy. The IRS is expected to issue additional guidance in the area of meals and entertainment deductions later in 2018.

EVENT2017 Expenses (Old Rules)2018 Expenses (New Rules)
Office Holiday Party or Picnic100% deductible100% deductible
Client Business Meals50% deductible if taxpayer is present, and not lavish or extravagant50% deductible if business is conducted, taxpayer is present, and not lavish or extravagant
Entertainment-related Meals50% deductibleNo deduction (e.g, meals incurred when no business is conducted, potentially at night clubs, cocktail lounges, theaters, country clubs, golf and athletic clubs, sporting events, and on hunting, fishing, vacation and similar trips)
Transportation to/from Restaurant for Client Business Meal100% deductible100% Deductible
Sporting Event Tickets50% deductible for face value of ticket (anything above face value is non-deductible)No deduction
50% deductible for skybox expenses to the extent of non-luxury seat ticket face value in such boxNo deduction
100% deductible for charitable sports eventsNo deduction
Contributions for the right to purchase tickets to an educational institution’s athletic events 80% deductibleNo deduction
50% for transportation to/from and parking at sporting eventsNo deduction
Club MembershipsNo 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 businessNo deduction
Meals Provided for the Convenience of Employer100% deductible provided they are excludible from employees’ gross income as de minimis fringe benefits under §119(a); otherwise 50% deductible50% deductible (nondeductible after 2025)
Meals Provided to Employees Occasionally and Overtime Employee Meals100% deductible provided they are excludible from employees’ gross income as de minimis fringe benefits under §132(e)(1); otherwise 50% deductible50% deductible (nondeductible after 2025)
Water, Coffee, and Snacks at the Office100% deductible provided they are excludible from employees’ gross income as de minimis fringe benefits under §132(e)(1); otherwise 50% deductible50% deductible (nondeductible after 2025)
Meals in Office During Meetings of Employees, Stockholders, Agents, or Directors50% deductible50% deductible
Meals During Business Travel50% deductible50% deductible
Meals at a Seminar or Conference, or at a Business League Event50% deductible50% deductible
Meals included in Charitable Sports Package100% deductible50% deductible (the exception provided under former §274(n)(2)(C), referring to former §274(l)(1)(B), was repealed)
Meals Included as Taxable Compensation to Employee or Independent Contractor100% Deductible100% Deductible
Meals Expenses Sold to a Client or Customer (or Reimbursed)100% Deductible100% Deductible
Food Offered to the Public for Free (e.g., at a Seminar)100% Deductible100% Deductible