New Tax Law Section 274: Meals and Entertainment Deductions

Get Clarity on Meals and Entertainment Deductions Under the TCJA

Untangling Tax Reform: Meals, Entertainment and Other Benefit Under New Tax Law Section 274

For generations business people were allowed to deduct expenses associated with entertaining current or prospective clients, customers and patients. Generally, business-related meals and entertainment expenses were deductible up to 50 per cent. If taxpayers fulfilled certain criteria, they were eligible for even larger deductions.

Before 2018, a business was able to deduct up to 50 percent of entertainment expenses directly related to the active conduct of a trade or business or, if they’re incurred immediately before or after a bona fide business discussion, associated with the active conduct of a trade or business. That changed, however, with the passage of the tax code overhaul last December.

Section 274 of the tax code now generally disallows a deduction for expenses with respect to entertainment, amusement or recreation after passage of the new tax law. However, the Tax Cuts and Jobs Act doesn’t specifically address the deductibility of expenses for business meals.

There now seems to be confusion over the extent to which entertainment expenses are allowed and cases where deductions are disallowed.

You’ll not only understand the amendment to Section 274 but know how to comply with the law while enjoying maximum deductions:-

• Understand the amendment to code Section 274(a)(1)
• What the Jobs Act did, and did NOT do to meals and entertainment expenses
• The difference between “meals” and “entertainment” under the law
• How to keep proper records of meals
• How to reconstruct lost records or incomplete records
• Analysis of §274 in light of the Tax Cuts and Jobs Act
• Legal authority for deduction of meals apart from §274
• Records requirements under §274(d)
• The latest (Oct. 3) updates and clarification from the IRS