New Tax Law - Meals and Entertainment
Under the new law, for amounts paid or incurred after December 31, 2017, deductions for business-related entertainment expenses are now 100% not deductible. This includes business meals with clients, prospects, referral sources, etc.
Meal expenses incurred while traveling on business and certain other business-related meals are still 50% deductible. The 50% disallowance rule also now applies to meals provided via an on-premises cafeteria or otherwise on the employer’s premises for the convenience of the employer; until 2025, when these meals become 100% nondeductible.
Meals – 0% deductible
Business meals with business associates, clients, customers, prospects or referral sources.
Meals and entertainment – 0% deductible
All entertainment, including admission fees, tickets, food and beverage unless it meets one of the exceptions under the section titled, “Meals and entertainment – 100% deductible.”
Meals – 50% deductible
Employee travel meals: Meals incurred by an employee or self-employed individual while traveling away from home if their duties require them to be away from the general area of their tax home substantially longer than an ordinary day’s work, and they need to sleep or rest to meet the demands of their work while away from home while out of town;
Meals for employees, stockholder business meetings: meals directly related to business meetings of employees, stockholders, agents or directors;
Meals for meetings of business leagues: meals directly related and necessary for attendance at a business meeting or convention such as those held by business leagues, chambers of commerce, real estate boards, and boards of trade that are exempt from taxation under section 501(a).
Meals for convenience of employer – 50% deductible
This is a separate account because these become 0% deductible in 2025 and this prevents having to change accounting and expense reporting systems in the future.
Meals served to employees who are required to staff their positions during breakfast, lunch, and/or dinner times; meals served to employees at in-office cafeterias;
Food and meal costs for employees who are required to live on premises for the convenience of the employer.