The Tax Act in 2018 has changed the deductibility of meals and entertainment expenses. Most businesses will now need to track the meals and entrainment expenses in multiple account classifications. Based on public comments from the IRS, and other information, the following is a reasonable understanding of what the deductibility of meals and entertainment, if any, is allowed starting in 2018.
Meals with clients, customers, or prospects at an entertainment activity (example: meals at a sporting event) Nondeductible
Meals with clients, customers, or prospects with a substantial business discussion 50 % Deductible
Meals with client, customers, or prospects without substantial business discussion Nondeductible
On-premises meals provided for the convenience of the employer (such as lunch or dinner provided to employees while working) 50 % Deductible
Meal reimbursements for employees while traveling on business 50 % Deductible
Free meals to employees from an on-site dining facility 50 % Deductible
Holiday Party or similar social events for employees 100 % Deductible
Meals at a seminar and conference 50 % Deductible
Meals offered to the public at free seminars 100 % Deductible
Water, coffee, and snacks at the office 50 % Deductible
Meals in office during meetings of employees, owners, etc 50 % Deductible
Charitable sporting events, cost of the sporting tickets and meals Nondeductible
Sporting event tickets Nondeductible
Club memberships Nondeductible

Of Course documentation is still required so that the taxpayer is able to prove:

  1. The amount of expenditure
  2. The time, date, and place of the expenditure
  3. The purpose of the business discussion and the identification of the people who participated.

A suggested “chart of accounts” to track meals and entertainment starting in 2018 might look like the following:

  1. Meals and entertainment – 100 % deductible
  2. Meals and entertainment – 50 % deductible
  3. Meals and entertainment – Nondeductible