Meal Deduction Guidance

With a new tax year, there is new guidance being issued for the new year. Specifically speaking, the IRS has addressed guidance for taxpayers that allows them to generally deduct 50% of the food and beverage expenses associated with operating their business.

According to the IRS, the amendments that were put in place by the TCJA were ambiguous when speaking toward the deductions on meals. The deductions did speak toward the denial of deductions for expenses on entertainment, amusement, or recreation in the workplace, but did not place a deduction on the expenses for business meals.

Business meal deductions can be found in Sec. 274(k), a part which was not changed by the TCJA. The deduction does not allow for expenses for food as a deduction unless (1) the expense is not lavish or extravagant under the circumstances, and (2) the taxpayer (or an employee of the taxpayer) is present when the food or beverages are furnished. However, the IRS will not allow any entertainment expenses to be categorized under the meal deduction as they are distinctly different expenses.

For the time being the IRS has said that taxpayers can rely on this recent guidance until proposed regulations are issued. As business owners and taxpayers it is important to stay up to date on recent tax changes and deductions. If you need help deciding tax issues or consequences contact us at the Center for Financial, Legal, & Tax Planning, Inc.