IRS Clarifies Regulations on Business Deductions for Meals & Entertainment


The Internal Revenue Service has issued final regulations on the business expense deduction for meals and entertainment following changes made by the Tax Cuts and Jobs Act (TCJA) in 2017.

The 2017 TCJA generally eliminates the deduction for any expenses related to activities generally considered entertainment, amusement or recreation. However, taxpayers may still deduct business expenses related to food and beverages if certain requirements are met.

 (1) The item was directly related to the active conduct of the taxpayer’s trade or business (directly related exception); or

(2) in the case of an item directly preceding or following a substantial and bona fide business discussion (including business meetings at a convention or otherwise), the item was associated with the active conduct of the taxpayer’s trade or business.

These final regulations clarify the changes brought on by the TCJA and the disallowance of the deduction for expenditures related to entertainment, amusement or recreation activities. This change will certainly impact expense accounts for businesses large and small, as well as affecting the taxes for many businesses owners.


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