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Under the Tax Cut and Jobs Act (TCJA) there has been some confusion about whether business meals would continue to be deductible as a business-related expense. The law, as worded, created some ambiguity about whether the TCJA would change how business meals would be treated. 

However, the IRS has just issued guidance on the deductibility of business meals in IRS 2018-76.

Distilled to its essence, the clarification states that qualifying business meals can continue to be deducted at a rate of 50%. The guidance letter provides clarification on what constitutes a qualifying business meal, as follows: asparagus-barbecue-bbq-675951

  •  The expense is an ordinary and necessary expense paid or incurred during the taxable year in carrying on any trade or business;
  • The expense is not lavish or extravagant under the circumstances;
  • The taxpayer, or an employee of the taxpayer, is present at the furnishing of the food or beverages;
  • The food and beverages are provided to a current or potential business customer, client, consultant, or similar business contact; and
  • In the case of food and beverages provided during or at an entertainment activity, the food and beverages are purchased separately from the entertainment, or the cost of the food and beverages is stated separately from the cost of the entertainment on one or more bills, invoices, or receipts. The entertainment dis-allowance rule may not be circumvented through inflating the amount charged for food and beverages.

If you have any questions about how this affects your business’s taxes, please free to contact your Zinner & Co. tax professional.