Nearly three years after the Tax Cuts and Jobs Act (TCJA) deemed many entertainment, amusement and recreation expenses nondeductible, we continue to encounter questions about the deductibility of meals, food and beverages.

In 2020, the IRS adopted some clarifying points to determine the deductibility of various items. Here are some basic items to keep in mind in gathering documents and information for your upcoming income tax return:

  • Business meals continue to be 50% deductible. For the deduction to be applicable, the meal must not be lavish or extravagant, and the tax payer must be present for the meal.
  • Expenses treated as compensation, like cafeteria charges or moving expenses, are 100% deductible. This includes reimbursements to employees or qualified independent contractors.
  • Employee social or recreational expenses – like company picnics or holiday parties – remain 100% deductible.
  • Food and beverages made available for free the general public – think coffee in the office lobby for customers and the public – are 100% deductible. Food and beverages sold to customers are also 100% deductible.

Still have questions about meals and entertainment deductions and how they may impact your upcoming tax return? Call our trusted tax advisors for guidance.

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