Businesses and employers need to be aware of the new rules as they plan their 2018 meals and entertainment budgets. 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 recipient employee.
Under the new law, for amounts paid of incurred after December 31, 2017, deductions for business-related entertainment expenses are disallowed. Meals expense incurred while traveling on business are still 50% deductible, but the 50% disallowance rule will now also apply to meals provided via an on-site cafeteria or otherwise provided on the employer’s premises for the convenience of the employer. After 2025, the cost of meals provided on the employer’s premises will be nondeductible.