NEW since 2018: The IRS issued guidance clarifying that taxpayers may generally continue to deduct 50% of the food and beverage expenses associated with operating their trade or business, despite changes to the meal and entertainment expense deduction under Sec. 274 made by the tax law known as the Tax Cuts and Jobs Act (TCJA), P.L. 115-97 (Notice 2018-76).
The Tax Cuts and Jobs Act specifically denies deductions for expenses for entertainment, amusement, or recreation.
It does not address the deductibility of expenses for business meals. This omission has created a lot of confusion in the business community, which the IRS is addressing in this interim guidance. Taxpayers can rely on the guidance in the notice until the IRS issues proposed regulations.
Under the interim guidance, taxpayers may deduct 50% of an otherwise allowable business meal expense if:
The IRS will not allow the entertainment disallowance rule to be circumvented through inflating the amount charged for food and beverages.