IRS Clarifies Deductibility of Business Meals

Thanks to the Tax Cuts and Jobs Act (TCJA), deductions for entertainment, amusement, or recreation expenses are disallowed. However, in a recent Notice, the IRS clarified that taxpayers generally may continue to deduct 50% of food and beverage expenses associated with their trade or business. This is the case if:

  1. The expenses are ordinary and necessary under IRC Sec. 162;
  2. The expenses are not lavish or extravagant;
  3. The taxpayer, or an employee of the taxpayer, is present when food or beverages are provided;
  4. Food or beverages are provided to a current or potential business customer, client, consultant, or similar business contact; and
  5. Food or beverages are purchased separately from entertainment (or stated separately on one or more bills, invoices, or receipts).

Taxpayers may rely on this guidance until proposed regulations are published by the IRS. Be sure to contact your Lewis & Knopf tax advisor with questions.