New IRS Guidelines on Business Meal Deductions

On Wednesday of last week, the IRS issued long awaited guidance clarifying that taxpayers may generally continue to deduct 50% of the food and beverage expenses associated with operating their trade or business, despite changes to the meal and entertainment expense deduction under the Tax Cuts and Jobs Act.

Entertainment expenses are not deductible. 

Taxpayers may deduct 50% of an otherwise allowable business meal expense if:

1. The expense is ordinary and a necessary business expense paid or incurred during the tax year when carrying on any trade or business
2. The expense is not lavish or extravagant under the circumstances
3. The taxpayer, or an employee of the taxpayer, is present when the food or beverages are furnished
4. The food and beverages are provided to a current or potential business customer, client, consultant, or similar business contact
5. For food and beverages provided during or at an entertainment activity, they are purchased separately from the entertainment, or the cost of the food and beverage is stated separately from the cost of the entertainment on one or more bills, or receipts. 

The IRS will not allow the entertainment dis-allowance rule to be circumvented through inflating the amount for food and beverages.

For more information you may visit the IRS news release HERE

Feel free to reach out if you have specific questions with regards to this blog.