How the Business Meals & Entertainment Tax Deduction Rules Changed in 2023

by | May 31, 2023 | Blog | 0 comments

How the Business Meals & Entertainment Tax Deduction Rules Changed in 2023

For many business owners, meals and entertainment play a significant role in running a successful business. And their tax deductions have been a valuable way for owners to reduce their tax liabilities each year. But you should be aware of recent changes to these deductions. 

Prior to the Tax Cuts and Jobs Act (TCJA) of 2018, businesses could deduct up to 50% of expenses incurred on meals and entertainment associated with business activities. However, while the TCJA eliminated most entertainment deductions, companies could still deduct 50% of the cost of meals.

The Consolidated Appropriations Act (CAA) of 2021 allowed organizations to deduct 100% of certain business meal expenses for 2021 and 2022. But that was a temporary change aimed at supporting the restaurant industry during the pandemic. That exception has since expired. That means that for 2023, most business meals are back to 50% deductible, while entertainment expenses are no longer deductible.

So, what is deductible in 2023?

Following are some general guidelines.
50% deductible expenses:
  • A meal with a client where work is discussed
  • Employee meals at a conference
  •  Employee meals while traveling
  • Food for an in-office meeting
  •  Dinner provided for employees working late
100% deductible expenses:
  • Food for company-wide events such as holiday parties and team-building outings
  • Food and drinks provided to the public to promote goodwill, such as coffee and cookies for customers.
  • Meals included as taxable compensation to employees or contractors
  • Meals that are an essential part of your business function, such as a food critic or food blogger

What about entertainment costs?

While most entertainment expenses are not tax-deductible anymore, some exceptions still exist. These include costs associated with business meetings, such as professional association meetings, chamber meetings, or conferences, and expenses for company events like holiday parties and rewards trips.
Building relationships through meals, drinks, or coffee can be vital for successful business dealings. And Boris Benic and Associates can ensure you’re taking advantage of all available tax deductions. Schedule a meeting with us today if you’d like to review your tax liability for 2023.