THE EXPENSE: MEALS ON-THE-GO
How to book it: Since there were no changes in legislation for these types of meals, continue tracking meals expenses while traveling outside of your normal commute, including business meetings, conferences, or meeting vendors as these will continue to be deductible by 50%.
The catch: If, for this business-related travel, you also dine a current or prospective client, track their meal separately. See below.
THE EXPENSE: MEALS WITH CURRENT OR PROSPECTIVE CLIENTS
How to book it: There’s a bit of uncertainty as to whether these types of meals will be considered tax deductible or not. As we wait for further clarification on the matter, though, play it safe and track all meal expenses that are completely unrelated to any type of entertainment in 2018, but don’t deduct them just yet. This is important as while currently these meals are not deductible and while we cannot guarantee it, we are hoping congress will clarify the repeal of the meals and entertainment deduction to only fully repeal entertainment expense. If this is the case, client meals which are unrelated to entertainment will still be deductible; you don’t want to miss out on this deduction by not tracking these expenses!
THE EXPENSE: MEALS FOR EMPLOYEES
How to book it: Once completely deductible, this has now been limited to a 50% deduction. Included are any meals for lunch meetings on or off business premises, office food, or meetings that include lunch fees. Take note the majority of those eating any in-office food must be an employee as defined by the new law (in which officers, owners, directors, and highly-compensated employees are excluded) for this deduction to be applied.
THE EXPENSE: MEALS ASSOCIATED WITH YEAR-END PARTIES FOR EMPLOYEES, TEAM-BUILDING OR TRAINING EVENTS FOR EMPLOYEES, MARKETING PRESENTATIONS, AND OPEN HOUSES FOR PROPERTY SALES.
How to book it: These types of food expenses are still 100% deductible, so be sure to keep track of your spending.
THE EXPENSE: COST OF GOODS SOLD FOOD EXPENSE
How to book it: Food purchased for resale or for use as a direct business expense (for example, by a restaurant, caterer, or deli) will continue to be deductible at 100% and should be tracked as Cost of Goods Sold.
Throughout 2018, as each expense is incurred, it is beneficial for you to keep these categories in mind and record each transaction accordingly. This will ensure that you do not miss out on any possible deduction while remaining in compliance with the new law. The more detail you include in your financials now, the easier it will be to sort out what is actually deductible at tax time.
Additionally, it is more important than ever to keep your receipts and record the purpose of meals, thereby ensuring you can properly substantiate your deductions and avoid additional confusion when it is time to file your business return.
If you’re feeling overwhelmed by your books – you don’t have to be! Contact us and find out how we can help.
The NY Accounting, Tax and Advisory Expert Blog