The Tax Cuts and Jobs Act brought with it some significant changes for 2018 to the Meals & Entertainment Deduction for business owners.
The highlights:
Entertainment expenses are no longer deductible
Meals continue to be 50% deductible if you meet the following criteria:
- The expense is ordinary and necessary under Code Section 162(a) or incurred in carrying on a trade or business; (while on business travel is okay
- The expense is not lavish or extravagant;
- The taxpayer or an employee of the taxpayer is present at the furnishing of the food and beverage;
- The food and beverage are provided to current or potential customers, clients, consultants or similar business contacts; and (THIS IS IMPORTANT – local meals when you are NOT with a client or potential customer are no longer deductible).
As I do your monthly books, it is imperative that you indicate which meals are business versus personal so I can code accurately. My advice is to note on the meal receipt who you were dining with and the purpose of the meeting and hold onto these receipts with your business records/receipts for potential audit. This is an area the IRS is starting to scrutinize much more than ever before so it is important that you are familiar with what is deductible and what is not.
Please let me know if you have any question!