10/7/2020 – Our experts here at Christianson know how important it is to be on top of the latest news that may impact your business. We want you to be aware that late last week, the Internal Revenue Service (IRS) announced updated guidance on the business expense deduction for meals and entertainment following law changes in the Tax Cuts and Jobs Act (TCJA).
In 2017, when the TCJA was released, these expenses which were incurred for events that could be considered entertainment, amusement, or recreation would no longer be deductible. The latest regulations from the IRS outline the following:
Taxpayers may continue to deduct 50 percent of the cost of business meals if the taxpayer (or an employee of the taxpayer) is present and the food or beverages are not considered “lavish or extravagant”. The meals may be provided to a current or potential business customer, client, consultant or similar business contact.
Food and beverages that are provided during entertainment events will not be considered entertainment if purchased separately from the event.
Prior to 2018, a business could deduct up to 50 percent of entertainment expenses directly related to the active conduct of a trade or business or, if incurred immediately before or after a bona fide business discussion, associated with the active conduct of a trade or business.
The Department of the Treasury and the IRS expect to publish proposed regulations clarifying when business meal expenses are deductible and what constitutes entertainment. Until the proposed regulations are effective, taxpayers can rely on guidance in Notice 2018-76 .
If you have questions relating to what qualifies as a business expense, or other tax questions, contact our experts today. We’re here to help!