By Dan Jastrzebski, Senior Associate, ALL CPAs
Have business contacts stopped inviting you to concerts and sporting events? Don’t worry, it’s probably nothing you did. The likely culprit? The government. That’s because under the recent Tax Cuts and Jobs Act (TCJA) deductions for entertainment expenses are disallowed. Although you can no longer deduct taking a client to a Taylor Swift concert, you can still treat your clients, prospects, and employees to a nice meal and save on taxes by claiming meal deductions. Just make sure you follow the guidelines below to correctly deduct your meal expenses.
Meal Deductions under the TCJA:
Meals with Clients, Customers, and Prospects
• Meals with clients, customers, or prospects where business is discussed: 50% deductible. (Please note to claim the deduction, meals must not be considered ‘lavish or extravagant’. This doesn’t mean you can’t claim a nice dinner at a fancy restaurant. You just can’t expense items that are significantly higher than what is considered reasonable given the facts and circumstances, like paying three times the market rate for an item.)
• Meals with clients, customers, or prospects at an entertainment activity: nondeductible. For example, a meal at Fenway Park or lunch at a local country club will be considered as entertainment-related expenses, and thus nondeductible. (We expect more guidance from the IRS on what exactly determines an entertainment facility).
Meals for Your Employees
• On-premise meals provided for the convenience of the employer (such as lunch or dinner provided to employees while working): 50% deductible
• Meal reimbursements for employees while traveling on business: 50% deductible
• Holiday party or similar social events for employees: 100% deductible
• Free meals to employees from an on-site dining facility: 50% deductible (until Jan.1 2026; then not deductible)
It’s important that you keep accurate records of meal-related expenses to claim deductions on your tax return. If you have any questions on meal deductions or changes under the TCJA in general, please reach out to me at DJastrzebski@all-cpas.com or 617-738-5200.
About the Author
Dan Jastrzebski
