Blog

Chew on This: Meals and Entertainment Expenses

IRS Notice 2018-76 clarifies the new rules around food and beverage deductions under the Tax Cuts and Jobs Act (TCJA).  The TCJA eliminated the traditional 50% deduction for business meals and entertainment, effective in 2018.  Therefore, businesses can no longer deduct the cost of expenses relating to entertainment, such as the cost of sporting or concert tickets following a substantial business discussion.  Entertainment includes any activity constituting amusement or recreation, such as entertaining at night clubs, cocktail lounges, theaters, country clubs, golf and athletic clubs, sporting events, and on hunting, fishing, vacation and similar trips.  However, the TCJA generally retained the deductibility of food and beverage expenses.

Under interim guidance provided in Notice 2018-76, the IRS states that a 50% deduction continues to be allowed for food and beverage expenses if the following conditions are met:

Notice 2018-76 contains three examples illustrating how the IRS intends to interpret these rules. All three examples involve attending a sporting event with a business client and having food and drink while attending the game.

Example 1: Taxpayer A takes a customer to a baseball game and buy the hot dogs and drinks. The tickets are nondeductible entertainment, but Taxpayer A can deduct 50% of the cost of the hot dogs and drinks purchased separately.

Example 2: Taxpayer B takes a customer to a basketball game in a luxury suite. During the game, they have access to food and beverages, which are included in the cost of the tickets. Both the cost of the tickets and the food and beverages are nondeductible entertainment.

Example 3: The facts involving Taxpayer C are the same as they are for Taxpayer B, except that the invoice for the basketball game tickets separately states the cost of the food and beverages. As a result, Taxpayer C can deduct 50% of the cost of the food and beverages.

If you have further questions about the new meals and entertainment expense rules, we will be happy to schedule a consultation with you.  Please call our office at 828-324-1661.

Sources:

https://www.irs.gov/pub/irs-drop/n-18-76.pdf; https://www.cpapracticeadvisor.com/tax-compliance/news/21091763/new-tax-rules-for-business-meals-food-for-thought?

Recent Posts

Join Our Team

Administrative Assistant – Position Description Summary Recognized as the Best of the Catawba Valley two years in a row (2020 and 2021) in the CPA/Accountant Category, Best Tax Preparer in 2021, Finest Tax Preparer in 2020, and Finest Bookkeeper in 2020, Sabrina P. Cook, CPA PLLC is seeking an administrative assistant to join our team. […] Read More →

Did You Make Money on GameStop? The Tax Man Is Coming

GameStop is the hottest topic in stocks these days, and if you were lucky enough to own some shares, you may have enjoyed as much as 8,000 percent increase in value over the past 6 months. You may be wondering what happened. GameStop is actually struggling as the market shifts from favoring in-person shopping to […] Read More →

Sabrina P. Cook, CPA Named Winner in Best of Catawba Valley Competition

Sabrina P. Cook, CPA is pleased to announce that our firm has been chosen by the Hickory Daily Record readers as the best Accountant/CPA and Finest Tax Preparer in the Catawba Valley for 2020.  Online voting was open to Hickory Daily Record readers from July 6th to August 2nd.  The winners were announced in a […] Read More →