IRS Eliminates Entertainment Deductions & Limits Food & Beverage Deductions

What’s Changed: The IRS recently issued final regulations for deducting meal and travel expenses. What’s changed?

  • Elimination of the deduction for entertainment, amusement, or recreation expenses
  • Limits to claiming food and beverage expenses

Who Can Help: Contact Jeff Senney at (937) 223-1130 or jsenney@pselaw.com to understand how this affects you and your business.

The Details: Under the TCJA, no deduction is allowed for Entertainment Expenses. While the proposed regulations included a definition of Entertainment Expenses, the proposed regulations did not specify whether food and beverage expenses (“Meal Expenses”) incurred in conjunction with the entertainment activity were subject to the Disallowance Rule”.

Code generally provides that no deduction is allowed for any Meal Expenses unless the expense is not lavish or extravagant. The taxpayer (or an employee of the taxpayer) must be present at the furnishing of such food or beverages.

What this means is the term “entertainment” does not include food or beverages unless the food or beverages are provided at or during an entertainment activity. It is important to note that the food and beverages must be purchased separately and appear on one or more bills, invoices, or receipts.

By removing the phrase “to another person or persons” at the beginning of the final regulation and adding the phrase “to the taxpayer” near the end, the final regulations emphasize that the taxpayer can receive a food and beverage expense deduction for food or beverages that the taxpayer provides to him or herself.

The final regulations will apply to tax years that begin on or after the final regulations are published in the Federal Register. When is this?

For more information about the TCJA, the final regulations governing Entertainment and Meals Expenses, or any other federal or state income tax matter, please contact one of our tax and business attorneys at 937-223-1130 or me directly at Jsenney@pselaw.com.

AUTHOR: Jeff Senney
jsenney@pselaw.com


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