2018 Meals, NOT Entertainment
BEGINNING IN 2018 ENTERTAINMENT EXPENSES ARE NOT DEDUCTIBLE!
For tax years through 2017, businesses could deduct 50% of the cost of meals and entertainment expended for a legitimate business purpose. Under the new law (TCJA), entertainment expenses, even for business purposes, are no longer deductible.
Business related meals are still 50% deductible. Meals provided to employees on the business premises for the convenience of the employer had been 100% deductible through 2017. Under the new tax law, such meals are only 50% deductible.
WHAT ARE ENTERTAINMENT EXPENSES?
Entertainment expenses are incurred when a business, either for itself or its employees, or for clients or customers, incurs expenditures to attend an event other than a business meal. Usually the purchase of tickets is involved. Such events would include but not be limited to athletic events, plays, movies, charitable events (previously 100% deductible). This makes the cost of season tickets and related seat license fees non-deductible; and seat license fees paid to a university can no longer be considered a charitable contribution.
WHAT RECORDKEEPING CHANGES MUST A BUSINESS MAKE?
While it is still legal for a business to incur entertainment expenses, those expenses can no longer be deducted from taxable income. If your business has incurred any entertainment expenses after 2017, those must be separated from what has generally been categorized as “Meal and Entertainment” expenses. Businesses with entertainment expenses should set up an account for meals and a separate account for entertainment. It also means reviewing expenses already posted in 2018 and reclassifying any entertainment expenses to the newly established “Entertainment” expense account.