Deducting Entertainment Expenses
What You Need to Know Regarding Changes to the Entertainment Expense Deduction
We are all in the relationship business. Relationships lead to Sales. Sales lead to Profits. Many times, to cultivate relationships, we wine, dine, and entertain our current clients and prospects. Thanks to the Tax Cuts and Jobs Acts the expenses that you previously wrote-off may no longer be deductible.
These new laws apply to small business and big business.
ENTERTAINMENT EXPENSES: Prior to 2018, as long as the expense was related to conducting business, you were allowed a deduction for entertainment and recreation expenses. The deduction was usually capped at 50%, but half was better than none.
For 2018 and forward, the deduction for Entertainment is 0%. Zero. Nada.
No matter if you’re courting new or potential clients, meeting vendors, or networking, these expenses will NOT be deductible:
Season ticket holders of football tickets, or any other sport
Golfing and other recreation activities
Country club dues and expenses
Fishing and hunting trips
Spa visits, concert tickets, etc
The entertainment items that are still deductible include:
Entertainment expenses that you treat as compensation to your employees (i.e. include in their W-2 wages)
Entertainment, recreation, or social expenses where you include all employees (Christmas party, etc)
What about the Meals deduction? This has been a muddy topic over the past month and a half, and will continue to be, until there are court cases and IRS rulings to back up their position on the matter. Because of that I think it’s important to contact your tax preparer and discuss your particular situation.
If you are unsure on any of the information please contact our office so we can discuss your particular situation.
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