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America’s Tax Experts
Wink Tax Services
2018 New Tax Law Severely Limits Entertainment Deductions
Business Entertainment Expenses
Directly Related To Test
Associated With Test
Note: This is one of a series of articles explaining how the various tax changes in the GOP’s Tax Cuts & Jobs Act (referred to as “the Act” in this
article), which passed in late December 2017, could affect you, your business or your family, in both 2018 and future years. This series offers
strategies that you can employ to reduce your tax liability under the new law.
If you are a business owner who is accustomed to treating clients to sporting events, golf getaways, concerts and the like, we have some bad
news for you. The GOP’s tax-reform bill that President Trump signed on December 22nd of last year eliminated the business-related deduction
for entertainment, amusement or recreation expenses, effective beginning in 2018.
This doesn’t mean you can’t still entertain your clients; it just means you can no longer deduct 50% of the cost of that entertainment as a
business expense, making it more costly for you to entertain clients.
But all is not lost! The Act does retain a deduction for business meals that are directly related to or associated with the active conduct of your
business. The term “directly related” means that actual business discussions were conducted during the meal and you anticipated a specific
business benefit from the meal. The term “associated with” is more liberal and includes meals either preceding or following a bona fide
business discussion. In either case, the business deduction continues to be 50% of the actual expense. Also remember that business meals
must be documented, including the amount, business purpose, date, time, place and names of the guests as well as their business relationship
That's not all! In the past, employers have been accustomed to deducting 100% of the cost of food and beverages provided to employees at or
near the place of business. That too has changed, and the Act now subjects food and beverages supplied to employees to the 50% limitation.
But that deduction is only allowed through 2025. As of 2026, employers’ costs for food and beverages furnished to employees will not be
Meals while traveling out of town on business continue to be deductible and are also subject to the 50% limitation.
If you have questions related to entertainment and meal expenses, please give this office a call.
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