By now everyone remembers when the TCJA was passed and all the tax changes that occurred. What some people may not know is that there are still some discrepancies that are being debated among the IRS. One of the biggest debates was over the meal deduction and to what extent it was allowed to be used. Luckily for us, recently the IRS issued guidance relating to the meal deduction.
A good starting point to understand is that the IRS clarified that taxpayers will generally be able to continue deducting 50% of the food and beverage expenses associated with operating their trade or business. Under the current guidance, taxpayers may deduct allowable business meal expense if:
The expense is an ordinary and necessary business expense under Sec. 162(a) paid or incurred during the tax year when 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 when the food or beverages are furnished;
The food and beverages are provided to a current or potential business customer, client, consultant, or similar business contact; and
For food and beverages provided during or at an entertainment activity, they 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.
Deductions are a big part of tax season and understanding if you may qualify is important, especially when it comes to deductions like the meal expense. If you have questions about deductions or meal expenses contact us at the Center for Financial, Legal & Tax, Inc.