Update on Meals and Entertainment Deduction Under New Law
July 19th, 2018
Under the new tax law there are major changes to one of the more common business expenses—outlays for meals and entertainment. Many, but not all, entertainment expenses are no longer deductible after 2017. For example, costs related to entertainment activities including membership dues, sports tickets and social clubs are no longer deductible. However, a number of meal expenses escape the crackdown.
Employee Meals on Company Premises
Under the old law expenses for food and beverages (and the facilities for serving them) furnished on the business premises of the taxpayer primarily for his or her employees were 100% deductible by the taxpayer. Under the new law, employee meals on company premises, defined the same way as the old law, are subject to two sets of rules:
- For amounts paid or incurred after 2017 and before 2026, these employer provided meals are 50% deductible. For amounts paid or incurred after 2025, no deduction will be allowed.
Recreational Expenses for Employees
Expenses by a taxpayer for a recreational, social, or similar activity primarily for the benefit of his or her employees (such as a Christmas party, annual picnic, or summer outing) are still 100% deductible under the new law, similar to the old law.
Supreme Court Rules Online Retailers Must Collect Tax
The Supreme Court on Thursday allowed states to make online retailers collect sales tax, siding against e-commerce companies like Wayfair Inc and Overstock.com Inc in their high-profile fight with South Dakota. Before the ruling only retailers with stores had to collect sales tax while e-commerce retailers could skip collecting them, which helped them lower prices. But the ruling may not be a big blow to Amazon.com Inc, which already collects sales tax on items it sells directly to consumers.
Elimination of Miscellaneous Itemized Deductions
Starting in 2018 deductions related to investment advisory fees, unreimbursed employee expenses, investment planning costs, and tax preparation fees are no longer deductible. These used to be deductible after they exceeded a floor equal to 2% of your adjusted gross income.