Confusion on the deductability of meals expense

In early October, the IRS came out with guidance on the meals deduction. There was a great deal of confusion as to whether meals were still deductible under the new Tax Cuts and Jobs Act (TCJA). According to the IRS, you can still deduct 50% of the food and beverage expenses associated with your trade or business. What the new law did take away is the deductions for “entertainment, amusement or recreation”. But the law did not specifically address meals.

 

Specifically, the IRS states the meals deduction is allowable if:

  1. The expense is an ordinary and 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; and
  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 beverages is stated separately from the cost of the entertainment on one or more bills, invoices, or receipts.

Steve Trojan, CPA is the owner of Flatiron Advisors Tax and Accounting and manages the Boulder, CO office. He can be reached at 720-598-1020.

Facebook Twitter LinkedIn