This is one of our most frequently asked questions from our business customers.

Holiday time is the best time of the year to meet with your customers and spread the holiday cheer. Even better, if you can deduct those expenses as a tax deduction.

As per the new 2018 Tax Cuts and Job Act (TCJA), there  has been no change to this tax deduction as compared to prior years.

History

The tax cuts and job act places more limits on the tax deductibility of meals and entertainment expenses. The changes to the deductions for meals and entertainment expenses are effective for amounts paid or incurred after January 1st of 2018.

Prior to passing of this tax reform law, the business was permitted to deduct 50% for business-related meals and entertainment expenses. Meals provided to an employee by an employer were 100% tax deductible and were tax-free to the employee.

Any amounts paid or incurred after January 1, 2018 are 100% tax deductible if they were relating to holiday or company parties. There is no deduction available if they are business meals with customers or prospects.

However, if you are travelling on business as an employee, there is 50% tax deduction available for meals.

Under the new law, for amounts paid or incurred after December 31, 2017, deductions for business-related entertainment expenses are now 100% not deductible. This includes business meals with clients, prospects, referral sources, etc.* Meal expenses incurred while traveling on business and certain other business-related meals are still 50% deductible. The 50% disallowance rule also now applies to meals provided via an on-premises cafeteria or otherwise on the employer’s premises for the convenience of the employer; until 2025, when these meals become 100% nondeductible.

Current tax law -Tax cuts and Job ACT (TCJA)

You are eligible to take 100% as a business expense for holiday parties. Please make sure you have receipts & other supporting documentation stored for tax documentation purposes.

Below is a list of most common entertainment expenses and how they impact your taxes :

1. Company events, office parties – 100% tax deductible for customers and employees.
2. Office snacks, beverages -100% tax deductible.
3. Meals provided by employer to employees- 50% tax deductible.
4. Meals for meetings -50% tax deductible.
5. Employee travel meals-50% tax deductible.
6. Business meals in 2018 – with customers, prospects – Not deductible in 2018.
7. Tickets to charitable events – not deductible.
8. Business entertainments- sports tickets events, concerts, fishing trips- not deductible.