Entertainment Expenses Not Deductible For Expenditures After 12/31/17

Posted on Thursday, February 08, 2018

Prior to 2018, 50% of entertainment expenses were deductible.  However, under the Tax Cuts and Jobs Act, Entertainment expenses are now completely nondeductible, regardless of whether they are directly related to or associated with the taxpayer's business.  No deduction is allowed for: (1) an activity generally considered to be entertainment, amusement, or recreation, (2) membership dues for any club organized for business, pleasure, recreation, or other social purposes, or (3) a facility used in connection with any of the above items.

Meals are still deductible at 50%.  However, meals provided on employer premises are now only 50% deductible (they were 100%) unless they are provided for recreational, social, or similar activities primarily for the benefit of non-HCE employees.

Prior to 2018, both meals and entertainment were 50% deductible, so many business put them in the same general ledger account.  Now that these items are treated differently, it is advisable for business to use separate accounts so that meal expense can be easily segregated from non-deductible entertainment expense.

Posted in Tax And Accounting Topics For Business

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