Taxpayers have been accustomed to deducting their business-related entertainment expenses to some extent. Under the Tax Cuts and Jobs Act of 2017, the deductibility of those expenses will change. Entertainment expenses, including expenses for a facility used in connection with entertainment, even though directly related or associated with the active conduct of a trade are business, are no longer deductible. Meals will remain deductible to an extent, depending on the nature of the meal.
Some entertainment-related expenses saw no change with the new tax law:
- Certain entertainment expenses for foods, services and facilities that are treated as compensation to an employee-recipient
- Expenses for recreational, social or similar activities and related facilities primarily for the benefit of employees who are not highly compensated
- Expenses for entertainment sold to customers
- Entertainment expense for goods, services and facilities that are includible in gross income of a non-employee recipient as compensation for services rendered or as a prize or award
Below is a brief summary/comparison of the meals and entertainment deductions available:
We are anticipating more guidance and clarification from Congress on the Tax Cuts and Jobs Act as the year continues. Warren Averett has been following these changes closely. If you have questions about how tax reform will affect you or your business, please contact your Warren Averett Advisor.