What Changed and Why It Matters
Before the Tax Cuts and Jobs Act (TCJA) of 2017, entertainment was 50% deductible. Now it's 0%. But meals associated with entertainment can still be 50% deductible — if the food is purchased separately or stated separately on the receipt. This distinction trips up a lot of business owners. Taking a client to a $500 dinner to discuss a deal? 50% deductible ($250). Taking them to a $500 basketball game? $0 deductible.What Counts as Entertainment
The IRS defines entertainment broadly: sporting events, theater, concerts, golf, fishing, vacations, and similar activities. Country club dues are also non-deductible. Even if you discuss business at these events, the entertainment cost itself is not deductible. However, food and beverages consumed at entertainment events can be deducted at 50% if they're separately stated on the bill or receipt.Example: Client Golf Outing
You take a client golfing. Green fees: $200 (not deductible — entertainment). Lunch at the clubhouse after: $80 (50% deductible = $40). Pro tip: always get a separate receipt for the meal, or make sure the venue itemizes food separately from entertainment charges. If you get one receipt for $280 with no breakdown, the IRS position is that none of it is deductible.
Documentation Requirements
For business meals to be deductible, document: the amount, date, place, business purpose, and business relationship of the people present. The business discussion doesn't have to happen during the meal — a meal directly before or after a substantial business discussion qualifies. Keep receipts for any meal over $75, though best practice is to keep all receipts.
For business meals to be deductible, document: the amount, date, place, business purpose, and business relationship of the people present. The business discussion doesn't have to happen during the meal — a meal directly before or after a substantial business discussion qualifies. Keep receipts for any meal over $75, though best practice is to keep all receipts.
Employee Meals and Team Events
Meals provided to employees for the employer's convenience (like working lunches) are 50% deductible. Company-wide events like holiday parties and summer picnics are 100% deductible as long as they're open to all employees. Office snacks and break room coffee are 50% deductible. These rules are separate from the entertainment restriction.Categorize Meals Correctly
Hivebooks separates business meals from entertainment automatically using Buzz AI, ensuring you never accidentally deduct a non-deductible entertainment expense.
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