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What about Entertainment?

Updated: May 4, 2023

If you entertain clients and regularly foot the bill for large meals with prospective customers, those expenses have been seriously curtailed and any many instances, completely eliminated.


Business expense

Even though meals and entertainment expenses have been limited to 50% deductibility (80% for those in the transportation industry) for a number of years, all entertainment has now been eliminated when related to the taxpayer's trade or business.


And lavish and extravagant meals have always been non-deductible, those entertainment expenses that are considered lavish and extravagant, cannot simply be reclassified to meals.

Further, any and all activities considered as amusement or recreation are also non-deductible as a result of the Tax Cuts and Jobs Act (TCJA).


The substantiation requirements are no longer provided since no entertainment is deductible.


What about meals?

Substantiation of the meal as a "business" meal is now more imperative than before, with names of attendees and the topic of discussion accompanying the receipt. Through 2022, however, business meals at restaurants are 100% deductible.


Substantiation ... what is that?

Substantiation is basically "proof" or "other evidentiary matter" that legitimizes the expense. I imagine the "Cohan" rule will no longer be applicable, especially in light of IRC Sec 274(d) and the TCJA update. Most expenses of $75 or less may be deducted without substantiation.


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