Remember Client/Prospect Meals and Fun are Largely No Longer Deductible!

There is so much good in the business world from the new tax laws that we feel bad to even mention this, but we did lose some deductions that had become automatic in so many minds that we feel we must!

As business people ourselves and for as long as we can remember, taking a client or prospect out to eat or to a round of golf or a concert has always been how business is done!  Then tax deducting it is also how business got done…NOT ANY MORE!  It’s time to review the old and new tax rules, and perhaps nothing changes, as business getting done first always trumps (no pun intended), and deducting it was a pleasant after-effect.  Perhaps the fact that deducting meals with prospects was allowed you to splurge a little more and buy the Surf & Turf instead of just the Turf!  Deducting golf justified golfing instead of working, so now you just need to do it without justification.  After all it’s still golf!  Getting a 20% deduction on all your business profits under the new “QBI” Qualified Business Income rule will more than cover the loss of deductions in these areas for the majority of us.  But when buying more equipment, hiring more staff, giving pay raises or other additional bonuses all gets accounted for, keeping up old habits without realizing that it’s no longer deductible might be an unpleasant step backward on your K-1, so let’s simply review.

Under the new law, for amounts paid or incurred after December 31, 2017, deductions for business-related entertainment expenses are disallowed.  Meal expenses incurred while traveling on business are still 50% deductible, but the 50% disallowance rule will now also apply to meals provided via an on-premises cafeteria or otherwise on the employer’s premises for the convenience of the employer.  After 2025, the cost of meals provided through an on-premises cafeteria or otherwise on the employer’s premises will be nondeductible.