Tax changes that took effect last year now limit employers’ ability to deduct employee entertainment events. But if businesses carefully navigate the new rules, exceptions allow them to continue deducting many employee meals and parties, at least in part.
How the Law Changed
Under the Tax Cuts and Jobs Act of 2017, meals with employees during which business is discussed are considered 50 percent deductible. If no business is discussed, the meal is not deductible and is fully taxable as entertainment. The IRS has stepped up scrutiny of deductions for expenses related to meals and events to ensure they’re for legitimate business purposes and not for entertainment.
