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IRS Interim Guidance on Deducting Meal Expenses for Businesses

January 22, 2019

The IRS has issued guidance clarifying that taxpayers may still deduct 50% of food and beverage expenses directly associated with their trade or business. When the Tax Cuts and Jobs Act (TCJA) made amendments to Section 274 of the IRS Code, it was specifically denying deductions for entertainment expenses but not necessarily expenses for business-related meals.

Under this interim guidance, taxpayers may deduct 50% of a business meal expense if:

1. The expense is ordinary and necessary and it is paid or incurred during the tax year when carrying on any trade or business;

2. The expense is not lavish or extravagant;

3. The taxpayer, or employee of the taxpayer, is present when the meals or beverages are furnished;

4. The food or beverages are provided to a current or potential business customer, client, consultant, or other business contact;

5. If food or beverages are purchased during or at an entertainment activity, they are purchased separately from the entertainment, or the costs of the food or beverages are stated separately from the entertainment on one or more receipts, invoices, or bills.