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Business Meals Expense

There is good news regarding business meals expense.  On October 3, 2018, the IRS issued Notice 2018-76, which provides interim guidance for business meals expense.

The notice separates the cost of meals from the cost of entertainment, and permits 50% of the cost of business meals to continue to be deducted by a trade or business.

The new tax law that was effective on January 1, 2018 specifically disallows the cost of entertainment.  (Under prior law, 50% of entertainment expenses had been deductible.)

By separating the cost of meals from the cost of entertainment, the IRS guidance indicates that 50% of the cost of food and beverages can be deducted as business meals when food and beverages are provided to a current or potential business customer, client, consultant or similar business contact, as long as the taxpayer (or an employee of the taxpayer) is present when such food and beverages are provided.

The notice also indicates that the cost of such business meals must be an ordinary and necessary business expense for the trade or business, and the cost cannot be lavish or extravagant under the circumstances.

The notice indicates that the Treasury Department will issue future regulations to more fully address business meals expense.  For now, taxpayers are permitted to rely on this notice.

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