Tax Reform Repeals Entertainment Expense Deductions
The Tax Cuts and Jobs Act (TCJA) has resulted in substantial changes to the deductibility of business expenses related to entertainment and meal costs. And, as you can imagine, business owners have a few questions about how they should proceed, such as whether they should move forward with their next networking event or golf outing or if they should just eliminate these activities altogether.
Prior to the tax reform, the deduction for meals and entertainment expenses were easily applied and offered huge tax savings. But under the new law, businesses can forget about those floor seats to the game or front-row concert tickets courtesy of a long-standing business partner. Per the TCJA, businesses can no longer deduct these types of broadly defined “entertainment” expenses. Instead, taxpayers must put in the work to determine whether their expenses fall under the category of an “appropriate deductible expense.”
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Pre-TCJA
Entertainment expenses before the TCJA were generally accepted and limited to a 50 percent deduction of the total amount of the expense. Additionally, a 50 percent deduction could also be filed for business meals as long as they weren’t considered extravagant or lavish.
Post-TCJA
Now that the TCJA is in effect, all entertainment expenses are nondeductible. That means tickets, concerts, trips, golf outings, sporting events, etc., can no longer be deducted, even if business is associated with the activity. That being said, business meals and beverages will remain 50 percent deductible.
If you have meal and entertainment questions or other questions or concerns related to tax reform in general, contact Rea & Associates. Our team of TCJA champions will work to provide you with answers. In the meantime, check out our comprehensive tax reform resource center for helpful Q&A, recently published articles, podcasts and more.
By Chris Axene, CPA (Dublin office)