The Internal Revenue Service has issued new guidance on the business expense deduction for meals and entertainment following law changes in the Tax Cuts and Jobs Act (TCJA). Previously, the TCJA eliminated the deduction for any expenses generally considered entertainment.
Under the new IRS guidance, taxpayers can continue to deduct 50 percent of business meals if the taxpayer or their employee is present, and the meals/entertainment is not considered lavish or extravagant. The meals may be provided to a current or potential business customer, client, consultant or similar business contact. Keep in mind that food or beverages that are provided during entertainment events will not be considered entertainment if purchased separately from the event.
The Department of the Treasury and the IRS expect to publish proposed regulations clarifying when business meal expenses are deductible and what constitutes entertainment. Until the proposed regulations are effective, taxpayers can rely on guidance noted on the IRS’s web site here https://www.irs.gov/pub/irs-drop/n-18-76.pdf.