Guidance on Changes to Expense Deductions for Meals, Entertainment
The IRS has issued Notice 2018-76
providing transitional guidance on the business expense deduction for meals and entertainment following law changes in the Tax Cuts and Jobs Act (TCJA).
The TCJA eliminated the deduction for any expenses related to activities generally considered entertainment, amusement or recreation. Taxpayers may continue to deduct 50 percent of the cost of business meals if the taxpayer (or an employee of the taxpayer) is present and the food or beverages are not considered lavish or extravagant. The meals may be provided to a current or potential business customer, client, consultant or similar business contact. Food and beverages that are provided during entertainment events will not be considered entertainment if purchased separately from the event.
The Treasury Department and the IRS intend to publish proposed regulations clarifying when business meal expenses are nondeductible entertainment expenses and when they are 50 percent deductible expenses. Until the proposed regulations are effective, taxpayers may rely on the guidance in Notice 2018-76. Click here
for the IRS press release, and here
for an in-depth look from the Journal of Accountancy.