Changes to the Deductibility of Meals and Entertainment Expenses

February 19, 2019

The Tax Cuts and Jobs Act includes significant changes to the treatment and deductibility of client and employee related meals and entertainment expenses. Below we expand on several situations regarding the deductibility of these expenses.

Client Related Meals and Entertainment

What did NOT change?

If you take a client out and discuss business over a meal, your meal can still be deducted. Like the old law, the expense is 50% deductible. The meal still cannot be lavish or extravagant. Transportation to and from the restaurant at which you meet is still 100% deductible.

What DID change?

In prior years, if you took a client golfing or to a sporting event, the entertainment expenses incurred for that event were 50% deductible. Under the new tax law, entertainment expenses are not deductible. Entertainment expenses include, but are not limited to: sporting event tickets, skybox expenses, transportation to or from the event, charitable sporting events, and expenses incurred at the club or site except for certain meals. The meals for these events are 50% deductible, but only to the extent they are either not included in the face value of the ticket (e.g. you buy a ticket and after entering you purchase concessions) or are separately itemized on the ticket (e.g. you get a box seat and get a buffet or unlimited bar access upgrade). However, if the price of the ticket was not separate from the price of the food, the full amount is not deductible.

Employee Related Meals and Entertainment

What did NOT change?

If you throw holiday parties every year or have an annual company picnic, those expenses are still fully deductible.

Also, meals while traveling to different cities are still allowed a 50% deduction.

What DID change?

If you provide water, snacks, or coffee to employees at your company office, you can only deduct 50% of the amount instead of 100% as in prior years. Overtime meals and meals provided for employer convenience, such as cafeterias on the company campus, are also limited to a 50% deduction starting in 2018, whereas they were 100% deductible under the old law.


If client or employee meals and entertainment expenses are a significant part of your business, we recommend analyzing how those expenses are being incurred and how they are impacting your business. For example, although season tickets to the Blues aren’t deductible, if you determine that taking clients or potential clients to games is generating significant revenue, you may want to continue paying for those tickets. Similarly, if providing quality snacks at your office maintains employee morale, you might continue purchasing those items even though the deduction is limited.

To account for the various categories, we suggest maintaining separate expense accounts for each category of M&E expenses. This will help simplify and streamline the preparation of your company’s income tax return as it relates to the deductibility of these items.

Below is a helpful chart that summarizes the changes discussed above:

2017 vs. 2018 Deductibility of M&E Expenses

2017 vs. 2018 Deductibility of M&E Expenses

  1. Office Holiday Party or Picnic
  2. Client Meals
  3. Entertainment Related Meals
  4. Transport to/from Client Meal
  5. Employer Convenience Meals
  6. Occasional and Overtime Meals
  7. Snacks/Coffee at the Office
  8. Travel Meals
  9. Sporting Event Tickets