Authored By James L. Hamilton
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Meals & Entertainment Expenses Post Tax Reform

The Tax Cuts and Jobs Act (TCJA) enacted some significant changes to the deductibility of meals, entertainment, and other employee fringe benefits for businesses which are incurred or paid after December 31, 2017.

Prior to the TCJA, taxpayers generally could deduct 50% of expenses for business-related meals and entertainment. Meals provided to an employee for the convenience of the employer on the employer’s business premises were 100% deductible by the employer and tax-free to the employee. Various other employer-provided fringe benefits were also deductible by the employer and tax-free to the recipient employee.

Under TCJA, for amounts paid or incurred after December 31, 2017, deductions for business-related entertainment expenses are now disallowed. Meals incurred while traveling on business are still 50% deductible, but the 50% disallowance rule will now also apply to meals provided via an on-premises cafeteria or otherwise for the convenience of the employer. After 2025, the cost of meals provided through an on-premises cafeteria or otherwise on the employer’s premises will be nondeductible.

2017 and prior (before TCJA) 2018 (After TCJA)
Company-wide events (i.e. Picnics and Holiday Parties)

100% deductible

100% deductible

Client Entertainment

Meals – 50% deductible

Meals – 50% deductible

Event tickets, 50% deductible for face value of ticket; anything above face is non-deductible

No deduction for entertainment expenses (charitable portion still allowed as deduction)

Tickets to qualified charitable events are 100% deductible

Travel Meals – Employees

50% deductible

50% deductible

Meals on or near office (Provided for Convenience of Employer) 

100% deductible provided they are excludible from employees’ gross income as de Minimis fringe benefits; otherwise, 50% deductible

50% deductible (non-deductible after 2025)

Other Fringe Benefits

Businesses could deduct the cost of employee parking, transit passes and bike commuting reimbursements, and employees could exclude the benefit from income.

Employee achievement awards could consist of anything within a dollar limit of $400 per award and $1,600 for all awards to the employee.

Businesses can no longer deduct the cost of employee parking and transit passes (bike commuting reimbursements are still deductible), but employees can still exclude the benefit from income, except bike commuting reimbursements.

Employee achievement awards must be tangible personal property (no cash, gift cards, coupons or certificates, nor tickets, meals, vacations, lodging or stocks and bonds)  The dollar limits remain unchanged.


Businesses should keep in mind a few things when reviewing their 2018 meals and entertainment policies. Because the effective date of the law change is based on expenses incurred after Dec. 31, 2017, the new rules apply now without regard to the company’s year-end. Fiscal year taxpayers therefore will need to adjust their policies. Businesses also should consider the impact of the new law on sponsorship arrangements, charitable events, and similar activities. Sponsorship arrangements often include suites or game tickets in addition to advertising benefits. Under the TCJA, the portion of a sponsorship agreement allocable to suites or game tickets will be nondeductible instead of 50 percent deductible. The remainder of the sponsorship agreement will continue to be deductible as an advertising expense.

The cost of charitable sporting events (such as a charity golf outing) typically involves two components: the cost of the golf and meals and the charitable contribution for amounts paid in excess of that amount. Before tax reform, the cost allocable to golf and meals was fully deductible. Beginning in 2018, the cost of meals and golf will not be deductible. The charitable contribution will continue to be deductible.

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