Schedule C Provisions
In prior years, a taxpayer generally could deduct expenses for activities considered to be
entertainment, amusement, or recreation if the expenses were directly related or associated with the active conduct of the taxpayer’s trade or business. For amounts incurred or paid after December 31, 2017, deductions for entertainment expenses are disallowed.
The TCJA deemed entertainment expenses as nondeductible regardless of the relationship of the expenses to the business activity, including meals purchased during entertainment activities. There are a few exceptions outlined in Code Sec. 274(e) including:
- Expenses for goods, services, and facilities that are treated as compensation to an
- Expenses paid or incurred by the taxpayer in connection with the performance of
services for another person, under a reimbursement or other expenses allowance
- Expenses for recreational, social, or similar activities primarily for the benefit of the taxpayer’s employees, other than highly compensated employees
Businesses can still deduct 50% of amounts paid for meals associated with the active conduct of the taxpayer’s trade or business.
For example, employee travel meals are still 50% deductible.