Hard work and dedication are required to find and keep clients for your business. In many cases, talking shop over a meal is a great way to make connections between your company and the people you’d like to serve. Under the old tax laws, these expenses could be deducted. But what’s changed since the most recent tax reform laws went into effect? As a business tax preparation service, Martinson & Carter CPAs wants you to be informed. Here’s what you need to know.
How the deductions worked in the past
Under the prior tax regulations, a business could benefit by taking clients out to eat. For example, you may have been able to receive up to a 50% tax deduction as long as the meal wasn’t extravagant. Other, similar expenses could be deducted, too. Entertainment-related meals were 50% deductible and transportation to and from a restaurant with clients was 100% deductible. Many business owners took advantage of these perks. For many people, it was a great way to spend time with current and potential clients while getting to enjoy a meal.
The current rules
While certain aspects of the tax code have stayed the same regarding client meals and deductions, others have changed drastically. Companies can no longer deduct meals with clients that include entertainment. Unfortunately, what falls under the category of “entertainment meals” by the IRS is very gray. In many cases, it’s better to not plan meals at entertainment venues such as theaters, nightclubs, and sporting events.
Should you take clients out for a meal?
As we mentioned before, there are some deductions that still remain concerning client meals. You can still get a 50% deduction for taking clients out to eat as long as the expenses are reasonable. In addition, transportation to and from the client meal is still 100% deductible. If you feel that it’s in your best interest to take a potential or current client out to eat, there are still some tax benefits to be had.