In a much-welcome development, the Internal Revenue Service has announced that both client and prospect business meals are now considered to qualify as tax deductions, in keeping with the Tax Cuts and Jobs Act of 2017. But what exactly does the new rule mean for you?
Under the new guidelines from the IRS, you are now permitted to deduct as much as 50% of business meals with clients and prospective clients, as long as a number of qualifications apply. The meal expense cannot be excessively extravagant, the taxpayer—i.e., you or one of your employees—must be present at the meal, and a customer, consultant, or client must be present at the meal. The meals are considered to be separate from any entertainment activity that you and your client may be attending at the time.
How can you establish that your business meals are a deductible expense? It’s very simple: All you need to do is hang on to the receipt, record the name of the client or customer with whom you shared the meal, and record the reason for the meeting. If there is no receipt, make a written record of the meal. You may also be able to use your credit card statement to provide proof of the transaction, but it’s still important to hold on to the receipt to provide further proof of the meal.