Prior to the Tax Cuts and Job Act, taxpayers generally could deduct 50% of expenses for business-related meals and entertainment. Meals provided to an employee for the convenience of the employer on the employer’s business premises were 100% deductible by the employer and tax-free to the recipient employee. Various other employer-provided fringe benefits were also deductible by the employer and tax-free to the recipient employee.
Under the new law, for amounts paid or incurred after December 31, 2017, deductions for business-related entertainment expenses are disallowed. Meal expenses incurred while traveling on business are still 50% deductible, but the 50% disallowance rule will now also apply to meals provided via an on-premises cafeteria or otherwise on the employer’s premises for the convenience of the employer. After 2025, the cost of meals provided through an on-premises cafeteria or otherwise on the employer’s premises will be nondeductible.
|2017 Expenses (Old Rules)||2018 Expenses (New Rules)|
|Office Holiday Parties
Summer Office Picnic
|100% deductible||100% deductible|
|Entertaining Clients||50% deductible||Meals – 50% deductible|
|Event tickets, 50% deductible for face value of ticket; anything above face value is non-deductible||No deduction for entertainment expenses|
|Tickets to qualified charitable events are 100% deductible|
|Employee Travel Meals||50% deductible||50% deductible|
|Meals Provided for Convenience of Employer||100% deductible provided they are excludible from employees’ gross income as de minimis fringe benefits; otherwise, 50% deductible||50% deductible
(nondeductible after 2025)
|Fringe Benefits||Businesses could deduct the cost of employee parking, transit passes and bike commuting reimbursements, and employees could exclude the benefit from income.
Employee achievement awards could consist of anything within a dollar limit of $400 per award and $1,600 for all awards to the employee for the year.
|Businesses can no longer deduct the cost of employee parking and transit passes (bike commuting reimbursements are still deductible), but employees can still exclude the benefit from income, except bike commuting reimbursements.
Employee achievement awards must be tangible personal property and not cash, gift cards, coupons or certificates, nor tickets, meals, vacations, lodging or stocks and bonds. The dollar limits remain unchanged.
For more information, please contact Tax Director, Rob Keasal.