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50% Deduction for Business Meals

  • September 2019 | by Abbott Pratt & Associates

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    The 2017 Tax Cuts and Jobs Act (TCJA) included a change to the meals and entertainment deduction and disallowed businesses to take the 50% for entertainment, amusement or recreation expenses.  Business are still allowed to take a 50% deduction on business meals though.

     

    What qualifies as a business meal?

    In order to qualify as a business meal, the taxpayer or employee of the taxpayer is required to be present at the meal along with the client, customer, etc.  The cost of meal must not be considered extravagant under the circumstances of the meeting, commonly referred to as ordinary and necessary. Lastly the meal must be directly related to the active conduct of your trade or business, or business was discussed during the course of the meal.

    So, what about food and beverages bought at a sporting/entertainment event?

    The TCJA still allows food and beverages bought at a sporting /entertainment event to be deducted.  Although the food or beverage must be bought separately and can not be included in the price of the ticket.

     

    Record keeping requirements.

    The IRS requires certain record keeping in order for the business meal to be allowable.  Below is a list of the items that need to be recorded in order to take the deduction.

    • Time and date of the event
    • Cost of the meals and beverages
    • Place the meals and beverages were purchased
    • Business purpose
    • The number of people served

    A receipt from a restaurant generally provides most of this information but it is important to remember to also record the business purpose of the meal and the number of people served.

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