Deducting Business Meals
What is commonly referred to as the Tax Cuts and Jobs Act (TCJA) changed the law by disallowing deductions for entertainment, amusement or recreation expenses. This left many wondering “what about business meals”?
While there are no regulations yet, the IRS issued Notice 2018-76 to address the issue. The Notice provides that taxpayers generally may still deduct 50% of the expenditure for food and beverages associated with their trade or business. More specifically:
1) the expenses should be ordinary and necessary under IRC Sec. 162;
2) the expenses cannot be lavish or extravagant;
3) the taxpayer, or an employee of the taxpayer, is present when food or beverages
4) food or beverages are provided to a current or potential business customer, client,
consultant, or similar business contact;
5) food or beverages are purchased separately from entertainment (or stated
separately on one or more bills, invoices, or receipts).
Practice Tip: The substantiation requirements have not changed. Keep adequate receipts and, ideally, contemporaneous lists showing who the meal was with and the purpose. Remember that it is still necessary to have adequate backup to support the income tax deduction.