Tax reform has had a significant impact on the tax deductions you can now claim for business entertainment and meals. The chart below shows you how the Tax Cuts and Jobs Act treats 12 common meal and/or entertainment events.
|Amount Deductible for Tax Year 2018|
|Meals with clients and prospects||X*|
|Entertainment with clients and prospects||X|
|Employee meals for convenience of employer||X|
|Employee meals for required business meeting||X|
|Meal served at Chamber of Commerce meeting||X|
|Meals while traveling away from home overnight||X|
|Year-end party for employees and spouses||X|
|Golf outing for all employees and spouses||X|
|Year-end party for customers||X|
|Meals for general public at marketing presentation||X|
|Team-building recreational event for all employees||X|
|Golf, theater, or football game with your best customer||X|
* Special Note about meals with clients and prospects:
The way the TCJA is worded makes it appear that meals with clients and prospects are not deductible. At the moment, nothing in the tax code expressly allows tax deductions for business meals with clients and prospects. Based on recent comments by members of the Joint Committee on Taxation, we learned that lawmakers did not intend to eliminate business meals with clients and prospects.
We’re not exactly sure how lawmakers can undo what they’ve done to the tax code in this area, but experience says that if there’s a will, there’s a way. We think it may take a technical correction to the tax code, but some speculate that you could get this done with a Joint Committee on Taxation Bluebook explanation.
Regardless, at the moment this appears to be really good news. Obviously, we would like to see some already-in-place technical action on which we could hang our hat, but that’s not going to happen for some time, perhaps many months. Meanwhile, here’s what you need to do:
- Track and document your client and prospect business meals as you have done (or should have done) in the past.
- Keep the pressure on your lawmakers, asking them to codify or otherwise clarify that client and prospect business meals are indeed deductible.
- Hope that client and prospect meals are indeed deductible for all of 2018.