Meals and Entertainment Deduction Changes In 2023

In an effort to support restaurants impacted by the COVID-19 pandemic, the Consolidated Appropriations Act (CAA) of 2021 allowed businesses to deduct 100% of certain business meals expenses in 2021 and 2022. Beginning January 1, 2023, meals and entertainment deductions reverted back to the limits placed under the Tax Cuts and Jobs Act (TCJA). For tax year 2023, many of the business meals deduction will be 50% deductible, while entertainment deductions will remain non-deductible.

Changes in 2023 include the following:
• Client Business Meals – 50% deductible
• Entertainment Related Meals – 50% deductible, if charges are separately stated from cost of entertainment
• Meals in office during meetings – 50% deductible

In order to deduct client business meals, they must meet the criteria of being ordinary and necessary in carrying on business, having the taxpayer present, and not being lavish or extravagant meals. Through the TCJA, entertainment expenses are no longer deductible.

For additional guidance from the IRS, click here. If you have additional questions, please reach out to your Wilkins Miller advisor.