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While it was made clear that entertainment expenses would no longer be deductible by the Tax Cuts and Jobs Act of 2017, the act lacked clarification related to the deductibility of business meals, until now.

Expenses for Business Meals under § 274 of the Internal Revenue Code: Notice 2018-76

Under this notice, taxpayers may deduct 50 percent of an otherwise allowable business meal expense if:

  1. The expense is an ordinary and necessary expense under § 162(a) paid or incurred during the taxable year in carrying on any trade or business;
  2. The expense is not lavish or extravagant under the circumstances;
  3. The taxpayer, or an employee of the taxpayer, is present at the furnishing of the food or beverages;
  4. The food and beverages are provided to a current or potential business customer, client, consultant, or similar business contact; and
  5. In the case of food and beverages provided during or at an entertainment activity, the food and beverages are purchased separately from the entertainment, or the cost of the food and beverages is stated separately from the cost of the entertainment on one or more bills, invoices, or receipts. The entertainment disallowance rule may not be circumvented through inflating the amount charged for food and beverages.

If you would like further clarification on this or other deductions or how they pertain to your business, please feel free to contact our office.