The 2017 Tax Cuts and Jobs Act (TCJA) eliminated the deduction for any expenses related to activities generally considered entertainment, amusement or recreation. However, what constitutes an entertainment expense or official business meal still remains unclear.
Prior to 2018, a business could deduct up to 50 percent of entertainment expenses directly related to the active conduct of a trade or business or, if incurred immediately before or after a bona fide business discussion, associated with the active conduct of a trade or business.
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.
All taxpayers can reference Notice 2018-76 until the official guideline is released by the US Treasury Department and IRS.
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