New Tax Act: Business Entertainment Expenses – What is Deductible?
The Tax Cuts and Jobs Act (the “Act”) is the most significant tax legislation enacted in the last 30 years. However, this new Tax Act is only temporary. Most of the new tax rules pertain to the next eight years. After eight years many of the changes will expire on December 31, 2015. When these new tax rules expire, the old tax rules which were in effect in 2017 will return which can be very complicated for tax planning purposes!
For business entertainment expenses, the Act has completely eliminated the deductibility of business entertainment expenses.
What are Entertainment Expenses? For entertainment expense, the Act generally provides that no deduction will be allowed for:
(a) A facility used in connection with entertainment, amusement or recreation;
(b) Membership dues paid to any “club” organized for business, pleasure, recreation or other social purpose;
(c) Any activity considered to be entertainment, amusement or recreation.
Previously these business entertainment expenses were 50% deductible; now they are not deductible (but will again be 50% deductible starting January 1, 2026).