IRS Recent Guidance on Business Meals and Entertainment
In case you own your business and missed the recent IRS guidance on treatment of business meals and entertainment expenses, there are some good news. Until the IRS publishes proposed regulations on the topic which it plans to do in the future, you can rely on their transitional guidance which clarifies that 50% of cost of business meals can still be allowed as a deduction.
Please remember that business entertainment expenses are no longer deductible under the Tax Cuts and Jobs Act. Thus, if you take your clients to a baseball game, the cost of the tickets is no longer deductible, whereas cost of meals purchased during the game is deductible at 50%. If the cost of meals is included in the cost of tickets, 50% deduction for meals will be allowed only if meals are listed separately on the ticket.
Below is a brief list of requirements to be met for business meals to be deductible at 50%:
The expense is an ordinary and necessary business expense;
The expense is not lavish or extravagant;
The taxpayer, or its employee is present when the food or beverages are furnished;
The meals are provided to a current or potential business customer, client, consultant, or similar business contact.