📆 Changes to Tax Deductions: Meals and Entertainment Expenses 🍽️🎉
As of January 1, 2018, new tax laws went into effect that have brought changes to the deductibility of certain expenses. The areas most impacted by these changes are Meals and Entertainment deductions. Here’s a quick summary of the changes and how they will affect your bookkeeping:
1️⃣ Entertainment Expenses: Under the new tax law, taxpayers can no longer deduct 50% of their entertainment expenses as they did before. This means that any costs related to entertainment, even business-related, are no longer tax deductible. This includes expenses such as tickets to sporting or theater events, amusement or recreational activities, trips, resorts, and more. It’s a disappointing change that takes away the tax-deductible fun.
2️⃣ Business Meals: The IRS no longer allows deductions for business-related meals. Previously, you could deduct 50% of the meal expenses if you or an employee were present during a meal that involved a business discussion. This included coffee meet-ups and lunches with clients and colleagues. However, under the new law, these deductions are no longer allowed. It’s a bummer, but it shouldn’t stop you from networking and building relationships.
3️⃣ Company Meeting Meals: Meals provided for employees, stockholders, and directors during a business meeting are still 50% deductible. This is good news! You can continue meeting with your internal team and enjoy a 50% deduction for the meals provided.
4️⃣ Working Meals & Company Events: Meals provided by the employer at the work location and holiday parties, picnics, or company events are now only 50% deductible. Previously, you could deduct 100% of these expenses, but the new law has reduced the deduction. It’s important to note that after 2025, the deduction for these expenses will disappear altogether unless the laws change before then.
To ensure clarity in your tax reporting, we recommend the following categorization and naming for your expenses:
1️⃣ Meals & Entertainment (non-deductible)
2️⃣ Company Meetings, Events & Working Meals (50% deductible)
Using these categories, you can accurately track your expenses and provide the necessary information for tax reporting. Keeping these categories separate will save you time and ensure you don’t mix deductible and non-deductible transactions, which can be challenging to sort out at year-end.
Take a moment now to review your bookkeeping and ensure that your expenses are tracked clearly and accurately. It’s always better to stay on top of things throughout the year rather than deal with a complex cleanup later.
Remember, if you need any assistance or have questions, our team at ZümiFi is here to help. Contact us to ensure your bookkeeping is handled smoothly and efficiently.
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We are always here to help!