The Tax Cuts and Jobs Act of 2017 has modified a long standing tax treatment regarding the deductibility of meals and entertainment expenses incurred in a trade or business. Old tax law allowed a 50% deduction for these expenses as long as the taxpayer established the item was directly related to the active conduct of the taxpayer’s trade or business.
The new tax provision, which applies to amounts paid or incurred after December 31, 2017, provides that no deduction is allowed with respect to (1) an activity generally considered to be entertainment, amusement or recreation, (2) membership dues with respect to any club organized for business, pleasure, recreation or other social purposes, or (3) a facility or portion thereof used in connection with any of the above items. Entertainment expenses directly related to a taxpayer’s active trade or business that are no longer deductible include golf outings, fishing trips, tickets to professional sporting events, and theater tickets, to name a few.
Taxpayers may still generally deduct 50 percent of the food and beverage expenses associated with operating their trade or business. Providing meals to employees on company premises for the benefit of the employer continue to be 100% deductible.
If you have any questions, please contact us at (949) 553-1020.