The Tax Cuts and Jobs Act of 2017 and Business Deductions

The Tax Cuts and Jobs Act of 2017 (TCJA) significantly impacted deductions for business meals and entertainment, leading to confusion about what is deductible and what is not. Here’s a brief overview of the changes.


The TCJA ended the practice of deducting expenses for activities deemed “entertainment, amusement, or recreation.” This includes club memberships and the cost of facilities related to entertainment. Most entertainment expenses are no longer deductible.


Businesses can still deduct 50 percent of the cost of business meals, provided that business is conducted during these meals, they are not lavish or extravagant, and other requirements are met. Notably, eligible food and beverages were 100% deductible in 2021 and 2022 if purchased from a restaurant.

With the reduction in entertainment deductions, questions arose regarding the tax treatment of meals provided during an entertainment activity. The IRS clarified that 50 percent of food and beverage expenses during an entertainment activity can be deducted if they are purchased separately or itemized on an invoice or receipt.

Regarding meals provided at or near the workplace, the TCJA reduced the deduction for these costs to 50 percent, starting in 2026. Previously, businesses could deduct 100 percent of meal costs, such as those provided for the employer’s convenience or to facilitate overtime work, that were excluded from employees’ income as “de minimis” fringe benefits.


There are exceptions to the above rules. For instance, businesses can still deduct 100 percent of meal and entertainment costs treated as employee compensation. A 100-percent deduction is allowed for recreational or social activities primarily benefiting rank-and-file employees, like holiday parties or picnics. Additionally, meal and entertainment expenses for certain employee or shareholder meetings or conferences are partially or fully deductible.

If you have questions about the deductibility of your meal and entertainment expenses, please contact us. Note that the TCJA did not change the rules regarding the deduction of business travel expenses.