Question: I heard under the new tax bill, many of the business-related meal, entertainment deductions are gone, is that true?
Answer: Meal and entertainment deduction has always been a complex tax area. The Tax Cuts and Jobs Act of 2017 (TCJA) are more stringent than before. It modified or eliminated some meal and entertainments deductions for transactions after 2017. Now with the new rules, business owners are more confused than ever.
Here are the clarifications of the tax treatment of some of the M & E related deductions:
Meal During Work Travel: 50% deductible
Meals at a Seminar/Conference: 50% deductible
Office Holiday Party or Picnic: 100% Deductible
Free Food and drink Offered to the Public: Such as food for open house day: 100% Deductible
Meals Provided to Employees Occasionally: 50% deductible (0 after 2015)
Meals for the Convenience of Employer 50% deductible (0 after 2015)
Meals through an in-house cafeteria facility: 50% deductible (0 after 2015)
Any expenses included in employee's W2 as income: 100% deductible
Meal expenses that's be reimbursed by other: 100% deductible
Food Baskets sent to clients: Treat as a gift: deductible under $25 each.
Sports Tickets to clients/business associates: Treat as a gift: deductible under $25 each. (The taxpayer does not accompany the recipient)
Soft drink, beverage, snack in the kitchen for the use of employees: 50% deductible (0 after 2015)
Club dues paid to professional or public service organizations: such as accounting association, rotary club, Chamber of commerce: 100% deductible if they are paid for a business reason.
Club dues paid to organizations organized for business, pleasure recreation and other social purposes: such as country clubs, golf, and athletic clubs: 0% deductible.
Entertainment: such as Theater, sporting events, skybox, nightclubs, cocktail lounges, and on hunting, fishing, vacation and similar trips-0 deductible.
Travel cost to Conventions Held on cruise ships: Deductible only if the meeting is directly related to his trade or business, with extra limitations
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Circular 230:The articles are for general information only. In accordance with IRS Circular 230 they are not considered tax opinions for purposes of relying on such statements in any challenge of the reporting of the above transaction by the IRS. If a full tax opinion is required certain procedures must be met . Also there is a significant cost for a full tax opinion to meet the requirements of Circular 230.