TAX REFORM – Business Meals and Entertainment Changes for 2018
The Tax Cut and Jobs Act of 2017 (TCJA) puts stricter limits on what businesses can deduct for meals and entertainment expenses for clients and its employees for amounts incurred or paid after December 31, 2017.
*Subject to the interpretation of the Internal Revenue Service. It is still unclear how the Internal Revenue Service will interpret the definition of business meals (meals with clients or prospects). Will these meals be considered entertainment and nondeductible, a business meeting and continue to be 50% deductible, or will there be specific definitions to distinguish between the two?
What can you do now? Our recommendation is to be diligent in the classification of meals and entertainment expenses for 2018 and beyond. Some of these expenses will no longer have any tax impact. These expenses should be segregated into different accounts for tracking (deductible and nondeductible), along with a separate account for the business meals in which we are still waiting for clarification. Separating the expenses as they happen will help alleviate sorting through one general ‘Meals and Entertainment’ account at year-end. If you have any questions or would like more details on how the new law may affect you, please reach out to your Adams Brown advisor. We are here for you!