Business Meal Deductions after the TCJA

The legislation known as the Tax Cuts and Jobs Act (TCJA), P.L. 115-97, eliminated the general deduction of business entertainment expenses under Sec. 274(a). The TCJA mostly left intact, however, the deductibility of food and beverage expenses as a business expense (generally, at 50% of the expense amount). But because of a long-standing understanding and practice of treating business entertainment and meals as congruent, practitioners sought guidance on separating the two.

The IRS provided the sought-after guidance in October 2020. Taxpayers and their advisers must carefully follow the rules set out in the final regulations for substantiating business food and beverage expenses to ensure a deduction is allowed for the expenses.

To substantiate business food and beverage expenses, adequately documenting the expenses remains paramount. The facts about business meal expenses that must be documented are slightly different for such expenses paid or incurred in the taxpayer's "tax home" versus those paid or incurred while traveling on business "away from home."

(Source: AICPA – CPA Letter Daily - The Tax Adviser - August 19, 2021)