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Rozes, Gouveia & Company, LLP

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Brian Clavet, CPA

Changes to Meals and Entertainment Expenses

 

Before the Tax Cuts and Jobs Act (TCJA), taxpayers could generally deduct 50% of business related meal and entertainment expenses, and exceptions allowed bigger deductions in certain circumstances. The TCJA shifts the playing field for expenses paid or incurred after 12/31/17.

 

 

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Unfavorable Change Disallows Deductions for Most Entertainment Expenses.  Effective for amounts paid or incurred after 12/31/17, the TCJA disallows deductions for the most common business related entertainment expenses, including the cost of facilities used for most business

related entertainment activities. Specifically, nondeductible treatment now applies to the cost of tickets to sporting events; license fees for stadium or arena seating rights; private boxes at sporting events; theater tickets; golf club dues; company golf outings for customers; hunting, fishing, and sailing outings; and so forth. Some business entertainment expenses are still deductible, but only in very limited circumstances.

 

Deductions Still Allowed for Eligible Food and Beverage Expenses.  After the TCJA, the most common business related meals are still 50% deductible, and the time honored rules for proving that meals are business related still apply. In addition, food and beverages that fall under certain exceptions are still 100% deductible after the TCJA. Although uncertain at this point, it appears businesses also can still deduct 50% of food and beverage expenses incurred at entertainment events, but only if business was conducted during the event or immediately before or after. These rules can get tricky, and future IRS guidance may change things.

 

Conclusion.  Consider assessing your current expense allowance policies to determine if the unfavorable TCJA provisions warrant changes; especially for entertainment expenses incurred by employees, which are now nondeductible (unless reported as taxable compensation). Accounting system changes may be necessary to separately track employee entertainment expenses and business related meal expenses, which are still 50% deductible.

 

Please contact us if you have questions or want more information. The current tax rules for business related meal and entertainment expenses are complicated, but we can help you plan ahead to get the best treatment for your business's expenses.

 

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Contact Us With Questions

401.941.0202 or toll free (outside RI) 888.286.2918

 

Steven D. Gouveia, CPA, ext 203     

Richard M. Chouinard, CPA , ext 202     

Brian S. Clavet, CPA, ext 205   

Brittanie A. Rotondo  ext 204

Rebecca L. Slaoui, ext 208   

Michael Mello  ext 207         

Donna L. Langevin, ext 201          

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