Entertainment Expense Deduction – How the Tax Cut & Jobs Act Has Affected Business Deductions

Photo by Matthieu Joannon on Unsplash


Remember all the business deals that used to be closed at the golf course or the local restaurant?  Starting in 2018 those expenses are no longer tax deductible.  No more client appreciation at the ball game or concerts and drinks for a major pitch.  The Tax Cuts and Jobs Act has so many business friendly provisions, but the Tax Act has gutted this particular deduction.

Here are the main bullet points –

1) Entertainment expenses are no longer deductible – this means the tickets to sports events, golf, etc where you entertain your clients or potential business associate, etc. are no longer deductible.

2) If you give tickets to a client where you don’t also attend the event, that would be considered a gift and would be only deductible up to the $25 per gift limit. If you give these tickets as gifts to your employees, those gifts would need to be added to their taxable income in the amount of the cost to the employer in order to qualify as a deduction.

3) While we are still waiting full guidance from the IRS, the Tax Act appears to make meals and drinks with clients completely non-deductible.

4) If you purchase meals to your employees or provide snacks/coffee/food for clients – those meals would be deductible at 50%. If you cater a convention or event, or if you hold an open house and provide food – those meal expenses would be deductible at 50% (they used to be 100% deductible).

5) Meals you have while traveling outside of your area are still deductible at 50%, however if you entertain clients with a meal while you are traveling, the current opinion is that those meals would not be deductible.

Of course, everyone has a situation that may have nuanced views but I wanted to give you these general guidelines before you all spend too much money in this area so that you are aware that the tax treatment would be different in 2018.

We’ll Chat Soon!


Related Posts: 8 last minute ways to lower your taxesNew Corporate Tax Implications for Small Business

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