Changes Coming to Meal and Entertainment Expenses
December 05, 2023
The days of lavish spending and writing it off as an entertainment expense have already been impacted by reduced travel and entertainment (T&E) guideline spending at many corporations. New tax laws will impact these expenditures even more.
Congress has eliminated large deductions for most entertainment expenses paid or incurred after December 31, 2017—fees or dues associated with social, athletic sporting clubs or organizations. The Tax Cuts and Jobs Act (TCJA) eliminated deductions for experiences considered entertainment, amusement, or recreation. The 50% deduction for expenses related to food and beverages was also part of this update. In October 2020, Congress changed the rules to allow a 100% deduction on certain business meals temporarily. For the tax year 2023, the 100% deduction expired.
Business Meal Deductions are 50%
To qualify for the 50% deduction, you must meet the following requirements:
- The expense must be ordinary or common and necessary (something that contributes to the business's success) and is directly related to the operation of your business.
- The expense must not be extravagant or lavish or go beyond what is considered reasonable for the business context.
- The taxpayer or an employee must be present at the time the food and beverages are provided.
- Food and beverages must be provided to the taxpayer or business associate.
- A separate invoice is required for food and beverage if it is provided during an entertainment activity.
You purchase tickets to the Los Angeles Rams game and take your client to the game. The tickets to the game are non-tax deductible. The food purchased at Sofi Stadium would be eligible for a 50% tax deduction if you provide the appropriate receipts.
If you purchase a suite at Sofi for the Los Angeles Rams game and the food and beverage are included in the suite under the same invoice, you would not qualify for a 50% tax deduction on your food and beverage since you do not have a separate receipt.
Changes to Employee Meals After 2025
As of today, certain employer-provided meal expenses paid starting on January 1, 2026, will not qualify for a tax deduction.
- Employer-provided meals on the employer's business premises for the convenience of the employer. For example - if an employer provides meals to employees to keep them on-site during working hours, it is considered for the convenience of the employer.
- Food, beverage, and eating facility expenses at an employer's business providing meals are considered a de minimis fringe benefit.
Appropriate documentation is imperative to receive the most beneficial tax deductions in all cases. An itemized meal receipt should have the name of the establishment, the date of service, the items purchased, the amount paid for each item, and the tax. The tip should be written on the receipt if it is not included in the total.
Contact our team to help you sort through your company's tax information and discuss your typical entertainment and meal expenses. We can also review the recordkeeping requirements so you can take advantage of every approved deduction.