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Business Tax Reform: Meals and Entertainment Deductions

Home » Our Blog » Business Tax Reform: Meals and Entertainment Deductions

The new tax reform act has a number of material changes for individuals and businesses. Some of which have been highlighted in the news and you may be well aware, but given it is being labeled as the ‘largest tax reform in 30 years’ you may not be aware of some of the other significant changes which could impact you come tax time next year.

One of these changes is putting in place stricter limits on the deductibility of business meals and entertainment expenses. The Tax Cuts and Jobs Act essentially killed deductions for entertainment related expenses unless they are “expenses for recreation, social, or similar activities primarily for the benefit of the taxpayer’s employees, other than highly compensated employees”. So, the office Christmas party should still be deductible as well as company family day at the park, but what about owner-employee outings or taking clients out to a basketball game, golf outing or dinner and drinks? Those related to owner-employees only or direct for client entertainment are most likely no longer deductible.

Why be concerned? Even if you aren’t in a business that spends heavily on customer, client or networking expenses you may still be surprised come end of 2018 when your company books and your tax return seem to be off quite a bit. If you showed it as an expense during the year and that reduced cash available and income on your books it doesn’t mean that it was truly deductible and instead it could come back as an owner distribution that you have to pay taxes on. Not good.

What to do? Discuss with your advisor and make sure you understand if your planned spending in these areas will be deductible and avoid the surprises. Need more strategic planning or have unanswered questions? Give us a call.

Changes Summary:

Expense Type                            Old Law                             New Law
Office Holiday Parties               100% Deductible             100% Deductible
Entertaining Clients                   50% Deductible               No Deduction
Business & Travel Meals          50% Deductible               50% Deductible
Event Tickets                              50% Deductible               No Deduction
Charitable Event Tickets          100% Deductible             No Deduction

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  • About Us
    ▼
    • Our Mission
    • Meet Our Team
  • Business Planning
    ▼
    • Business Law
      ▼
      • Business Acquisition
      • Business Start-Ups
      • Succession Planning
    • Asset Protection
    • Business & Corporate Planning
    • Professional Practice Planning
    • Dental Practice Planning
    • Tax Planning
    • Contracts
    • Trademark Licensing
  • Individual Planning
    ▼
    • Comprehensive Estate Planning
      ▼
      • Trusts
      • Wills
      • Power of Attorney
      • Revocable Trusts
      • Estate Planning For Minor Children
    • Charitable Planning
    • Special Needs Planning
    • Personal Tax Planning
    • Probate, Trust & Estate Administration
      ▼
      • Probate
      • Trust Administration
    • Elder Law
  • Resources
    ▼
    • Testimonials
    • FAQs
    • Common Legal Terms
    • Videos
    • Online Forms & Questionnaires
    • Our Blog
    • Newsletter
    • Past Webinars
    • Events
    • Make a Payment
  • Contact
    ▼
    • Schedule A Consultation