Beginning in 2018, the recent federal tax law changes have eliminated the 50% deduction for business-related entertainment expenses. Under previous law, ordinary and necessary expenses for an activity considered to be entertainment was permitted as a deduction of 50% of the expense provided that the activity was directly related to the active conduct of a trade or business. This deduction has been repealed under the new tax law. Generally, the 50% deduction allowable for food and beverage in connection with a trade or business is still permitted.
It was often common for businesses to track both meals and entertainment (M&E) within the same account in their accounting software. With this change in law, we recommend that businesses now track these costs separately to assist in tax compliance and reporting at the end of the year.
If you have questions on this or how the new tax law affects you and your business, please contact us today to schedule an appointment.