Elimination of Entertainment Expense Deduction

Elimination of Entertainment Expense Deduction


This is one change you may not have heard about in the Tax Cuts and Jobs Act of 2017 (TCJA): Effective January 1, 2018, Congress eliminated the 50% deduction previously allowed for entertainment expenses. Up through December 31, 2017 businesses could deduct 50% of entertainment expenses directly related to or associated with the active conduct of your trade or business. Now, there is no deduction allowed.

This means that entertaining at nightclubs or cocktail lounges, providing theater tickets, paying for a golf outing, offering sporting event tickets, and hunting or fishing trips provided to employees, customers or vendors are no longer deductible. It doesn’t matter if you discuss business before, during or after the event- no deduction is allowed.

Prizes and awards to non-employee recipients are still 100% deductible, as long as they are includible in the recipient’s income. This goes for entertainment expenses that are treated as compensation to an employee recipient as well. Expenses for recreational or social activities primarily for the benefit of employees are also still fully deductible. This includes your typical company Christmas party or summer picnic. Finally, meal expenses, while out of town for business, are still deductible for up to 50% of the meal cost.

To discuss this or other aspects of the TCJA please call CPA Consulting Group, LLP at 307-577-4040.