Oh no! Not my meals and entertainment

That’s right. The new tax bill eliminates the meals and entertainment deduction, so no more golf games, theater tickets or supping on the IRS. The new 2018 tax act has thrown out these categories of deductions. 

The IRS has long resented anyone having fun at the expense of the U.S. Treasury. The squad of young attorneys who write tax code for the IRS have succeeded in eliminating the meals and entertainment deduction for both businesses and individuals.  

You can still do the entertaining. You just can’t deduct it.  

This tax law change may not affect our local restaurants very much, but the impact on New York City restaurants may be profound. Tax law changes always have impact on one business or another, sometimes for the better, but not surprisingly, sometimes for the worse. My personal preference is for economic equilibrium, so the little guy knows what to expect and can grow. The new tax bill, however, is not about the little guy.

If you provide meals to employees on your premises, the expense is 50 percent deductible.  (It used to be 100 percent deductible.)

So what about the office holiday party? If it happens in a restaurant, it is not deductible. If you have it catered in your office or shop, it is 50 percent deductible. I don’t think it will be quite as festive. Maybe a nice centerpiece? 

Travel meals do not change.  They are still 50 percent deductible. But what about when you travel and then entertain a client while traveling? My bet is that your portion of the meal is deductible at 50 percent, but the portion for your client is not deductible. This extra level of bookkeeping is an imposition on the already frantically busy small business owner. 

In my experience, the local business person spends about $1,000 a year on meals and entertainment. In 2017, half of this would be deductible, or $500. At a 20 percent effective tax rate, the tax savings would be $100.  This money would not be saved in 2018.  One hundred dollars more in tax for taking out business associates doesn’t look like a deal-breaker to me.  So The Woodland, The Boathouse and The White Hart need not fear.  (Apologies if I didn’t mention your favorite spot.)    

Next, how to protect your office-in-home deduction.  


Martha Miller is a tax attorney who lives and works in Lime Rock. None of the information presented here should be seen as an endorsement of her business.