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Our business clients have long taken advantage of the deductions allowed for meals and entertainment expenses. The new tax law makes some large changes to the old law that has been in place since I began practicing as an accountant, so please make a note of this.

After December 31, 2017, business entertainment is NO LONGER DEDUCTIBLE. The following items are no longer deductible under the new tax law:

  • An activity generally considered to be entertainment, amusement, or recreation;
  • Membership dues with respect to any club organized for business, pleasure, recreation, or other social purposes;
  • A facility or portion thereof used in connection with any of the above items.

So, this means that deductions are NO LONGER ALLOWED for the cost of such activities like golf outings, fishing trips, sporting events, concerts, etc., with clients or business associates, even if business is discussed.

Business meals are still 50% deductible in the following cases:

  • The expense is an ordinary and necessary expense paid or incurred during the taxable year in carrying on any trade or business;
  • The expense is not lavish or extravagant under the circumstances;
  • The taxpayer, or an employee of the taxpayer, is present at the furnishing of the food or beverages;
  • The food and beverages are provided to a current or potential business customer, client, consultant, or similar business contact; and
  • In the case of food and beverages provided during or at an entertainment activity, the food and beverages are purchased separately from the entertainment, or the cost of the food and beverages is stated separately from the cost of the entertainment on one or more bills, invoices, or receipts.

The old rules providing for 100% deductible employer-provided meals has also been changed to only allow for 50% deductibility.

Please keep this new law in mind as you gather your tax return information for 2018. If you have questions for us, please let us know.

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