Are you currently deducting business meals and beverages?
An important note from recently released IRS final regs on deducting meals and beverages during an entertainment event.
Generally, meals and beverages are 50% tax deductible (100% in 2021 and 2022) if the costs meet exceptions. Entertainment was once 50% tax deductible as well until the 2017 Tax Cuts and Jobs Act fully disallowed entertainment costs.
Assuming meals and beverages meet exceptions there are a few additional steps involved to make sure they are deductible during an entertainment, amusement or recreation event.
Meals and beverages itemized separately from entertainment on an invoice are 50% deductible (100% in 2021 and 2022). In addition, meals and beverages itemized separately must also reflect the venue’s usual selling cost for those items if they were to be purchased separately from the entertainment or must approximate the reasonable value of those items. No inflating the costs!
It is good practice to review your accounting chart of accounts and consider changing the description of your meals and entertainment account to meals and beverages. Changing the description may help to avoid future inquiries as to whether you’ve included nondeductible expenses in the account.
Happy tax planning!
Disclaimer: This blog is meant for informational purposes only and the reader should consult with their tax advisor to make sure the topic fits their financial situation.
Eric Shadowens is a CPA located in Louisville, Ky and is the author of this article. If you’d like to reach out to him about his services his contact info is below.
LinkedIn: https://www.linkedin.com/in/ericshadowens/
Email: eshadowens@dmlo.com
Phone: 502-326-2319
