New tax reform is putting stricter limits on what your business can deduct for meals and entertainment.
Business meals with clients and meals while travelling (50% deductible) – Nothing changed with these business expenses. They are still 50% deductible.
Entertainment events (0% deductible) – Taking your clients to ball games, concerts, or other types of events are no longer deductible for tax purposes. Prior to 2018 you were only allowed to deduct 50% of these expenses. Colvin CPA has created a separate expense account for this category in Xero.
On site meals (50% deductible) – Business meals for employees at the convenience of the employer, ie on-site meals, are now 50% deductible. Prior to 2018 we were able to deduct 100% of these expenses. This part of the law is set to expire in 2025 when the expense will no longer be deductible.
Holiday parties (100% deductible) – Yep, congress saved the holiday party! They are still 100% deductible.
Record keeping – You are still required to keep records for these expenses. This is VERY important. We can’t stress this enough. Your documentation should include the amount, date, who attended and the business purpose of the gathering.
Per diem – Don’t want to keep up with all those receipts when you travel? Who does? Instead, your company can use the per diem rates to pay its employees for meals while traveling. It means that you do not have to keep up with receipts, but you do have to look up rates for each location the employee is going to. Click Here to see the per diem rate table. For example, if an employee is going to Vegas for a convention for five days, you just write a check to the employee for $320 (5 x $64 per day). These per diem payments for meals are 50% deductible. Let us know if you would like more information on per diem expenses for travel.
We hope this helps you run your business with intention.