Thanks to the Consolidated Appropriations Act, from January 1, 2021 to the end of 2022, all business related meals were 100% deductible... Unfortunately, this is changing for 2023 and when I say changing I mean cut in half. Let's review the ins and outs of meal and entertainment deduction for 2023 and learn how to take advantage of these valubale money-saving tax deductions.
How to Deduct Meals and Entertainment
Before we get into the nitty gritty of each deduction, let's go over the general rules of the meals and entertainment deduction. Since the passage of the Tax Cuts and Jobs Act in 2018, you can only deduct the cost of meals and beverages; any other costs associated with entertaining are no longer deductible. That means you CAN'T deduct the cost of concert tickets, a trip to the golf course, sporting events, etc. While we hope this doesn't last forever, for now, there are still deductions still available for you to take advantage of.
2023 Meals and Entertainment Deduction List
You may be asking yourself at this point, "so what CAN I deduct on my 2023 taxes?" Here are some tax deductions that may be partially or completely deductible.
Business meals with clients (50%)
Food items for the office (50%)
Meals while traveling for work (50%)
Meals at a conference (50%)
Food for company holiday parties (100%)
Food and beverages given to the public (100%)
Dinner for employees working late at the office (100%)
Your Guide to Meal Deductions
Most business meals are still 50% deductible under current IRS rules. So, if you take a prospective client out to a swanky lunch spot in the hopes of wooing them and winning their business, you can deduct 50% of the cost. However, if you bring a friend, the cost of their meal is not deductible. There are a number of exceptions, so make sure you carefully follow IRS guidelines when deciding what to deduct.
If the business meal exceeds $75, you must keep receipts or other documentation for meal expenses. If the meal costs less than $75, the IRS does not require you to keep these documents. Regardless of how much the meal costs, you must keep a detailed record that includes the following information:
Total amount, including tax and tip
The name of the restaurant/place
Details of the occasion (who is in attendance, including titles and business names, and how the meal relates to business purposes)
Your Guide to Entertainment Deductions
Like I mentioned earlier, entertainment expenses are no longer deductible. Renting out a entertainment facility, like a bowling alley, hotel suite or a yacht is not deductible. You also cannot deduct the costs of membership dues, like a membership to a country club.
There are, however, some ways to take advantage of the entertainment deduction. According to the IRS, the following business entertainment expenses are still deductible:
Entertainment treated as compensation on your originally filed tax returns (and treated as wages to your employees)
Recreational expenses for employees such as a holiday party
Expenses related to attending business meetings or conventions of certain exempt organizations such as business leagues, chambers of commerce, professional associations, etc.
Entertainment sold to customers. For example, if you own a bar or nightclub then your expenses for the entertainment you offer to your customers, such as a band, aren’t subject to the nondeductible rules.
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