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Tax Cuts and Jobs Act – Entertainment and Other Expenses – Taxpayer Considerations

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Entertainment and Other Expenses

Under the Tax Cuts and Jobs Act (the Act), no deduction is allowed for entertainment, amusement or recreation activities, facilities, or membership dues relating to such activities or other social purposes. Although extremely limited, the only recreation expense that may be 100% deductible are expenses for recreational social, or similar activities primarily for the benefit of employees. Business meals and beverages remain 50% deductible.

Taxpayer Considerations
Taxpayers should consider creating separate accounts/sub-accounts to track food/beverage expenses separate from entertainment expenses. Note that substantiation for these expenses should separately state how much of the expense relates to food/beverage and how much relates to entertainment.

Taxpayers should start/continue tracking recreation expenses for the benefit of employees that qualify as 100% deductible.

De minimis meals – Convenience of the Employer

The Act prohibits any deduction for meals provided for the convenience of the employer. However, taxpayers are allowed to deduct 50% of the costs associated with such meals for amounts paid or incurred beginning January 1, 2018 through December 31, 2025 with no deduction allowed for amounts paid or incurred after December 31, 2025.

Taxpayer Considerations
Taxpayers should evaluate whether the impact of this provision warrants a change in its policies or practices regarding meals provided for the benefit of the employer. Taxpayers should also review whether such meals were business food and beverages for employees and qualify under “meals” provisions that were not eliminated by the Act and still allow a 50% deduction.