Meals and Entertainment Expenses After Tax Reform

If you’re in the business of wining and dining clients and customers you will want to know about this change after tax reform.

We want to alert business owners, clients and readers to an important change under the new tax reform commonly known as the H.R. 1 Tax Cuts and Jobs Act of 2017.


by Anna M. Coldwell, CPA, from ORBA’s tax services team. 

The Tax Cuts and Jobs Act (TCJA) enacted extensive changes to the deductibility of meals and entertainment (M&E) expenses for companies.

Prior to the new tax law, companies generally could deduct 50% of expenses for business-related meals & entertainment expenses. Further, employer-provided meals for employees on the employer’s premises and meals for the convenience of the employer were both 100% deductible.

With the enactment of the TCJA, entertainment expenses paid or incurred after December 31, 2017 are no longer deductible. Employer-provided meals and meals provided for the convenience of the employer are limited to a 50% deduction. This includes food and beverages provided to employees at the company facilities, such as an on-premises cafeteria. Expenses for recreational, social or similar activities primarily for the benefit of the taxpayer’s employees, other than highly compensated employees, are still fully deductible.  

A summary of the changes made to the deductibility of the various types of meals & entertainment expenses.
Type of Expense

General Deductibility Under Prior Tax Law

(old rules)

General Deductibility Under TCJA

(new rules)

Effective Date
Business Entertainment – Includes tickets to sporting events, shows, amusement or recreational activities incurred in connection with the company’s trade or business. 50% deductible0%Expenses paid or incurred after December 31, 2017.
Recreational, Social or Similar Company Activity – Provided primarily for the benefit of employees (e.g., the company holiday party or summer picnic). 100% deductible100% deductibleNo change.
Business Meals – Incurred or paid during the company’s ordinary trade or business activities (e.g., a sales employee’s meals while traveling for business).50% deductible50% deductibleNo change.
Meals for the Convenience of the Employer – Covers meals provided on or near business premises.100% deductible50% deductibleExpenses paid or incurred after December 31, 2017.
Employer-provided Meals at Employer’s Business Premises – Includes cafeteria facilities and other meals on-premises at the company.100% deductible50% deductibleExpenses paid or incurred after December 31, 2017 (will be non-deductible beginning after December 31, 2025).

In 2018, companies should review the tax treatment of their meals & entertainment expenses to identify which should be fully deductible, subject to the 50% limitation or not deductible. Companies should then update their general ledger meals & entertainment expense accounts for these changes. Many companies include all M&E expenses in one general ledger expense account. We recommend that you create separate accounts. As an example, a company could have three M&E expense accounts set up as: Entertainment, Business Meals and Internal Company Events. This will avoid going through invoices and accounts to identify the different “buckets” for deductibility purposes at the end of the year.

We are waiting for further guidance from the IRS on the new tax law to provide more clarity on these changes and related tax planning.  


Important October 2018 update: The IRS realized the deductibility requirements created some confusion. Read our tax team’s, Robert Swenson’s, article, The Business Meal Expense Deduction Lives On Post-TCJA.

The Tax Cuts and Jobs Act (TCJA) was packed with goodies for businesses, but it also seemed to eliminate the popular meal expense deduction in some situations. Now, the IRS has issued transitional guidance — while it works on proposed regulations — that confirms the deduction remains allowable in certain circumstances and clarifies when businesses can claim it. Continue reading…

Request for Comments

The IRS has requested comments on future guidance clarifying the treatment of business meal expenses and entertainment expenses, including input on whether and what additional guidance is required, as well as the definition of “entertainment.” Businesses should submit comments to the IRS by December 2, 2018. If you have questions on how this guidance may affect your business, please do not hesitate to call us. We would be pleased to help.

For more information, contact Rob Swenson at rswenson@orba.com or your ORBA advisor at 312.670.7444.

Want to learn more about what is 100% deductible and non-deductible under the new tax reform? Contact our tax services team today!

Now that we’re part of one of Chicago’s most prestigious CPA firms, Ostrow Reisin Berk & Abrams, Ltd, you’ll also find us online at www.orba.com.  With our ORBA colleagues, we’re positioned to offer you an expanded array of state-of-the-art services. 

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