Sorry tickets to see Taylor Swift perform are not tax deductible. SAO PAULO, BRAZIL – NOVEMBER 24: … [+]
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Tax planning is a great way to optimize your take-home pay if you run your own business. Essentially, the fewer taxes you pay, the higher your net income. The entertainment and meals tax deduction has been a great way for successful business owners or self-employed people to maximize their tax deductions yearly. Unfortunately, the Trump tax plan cut the value of the meals and entertainment tax deduction by 50% in 2023.
Keep reading as we share what you need to know about the meals and entertainment deduction for 2023 and 2024. This tax deduction guide can help you take advantage of these valuable money-saving tax deductions. I know quite a few entrepreneurs who conduct most of their business meetings out and about over meals at restaurants. These folks can rack up some substantial tax savings.
You may be able to deduction your meals with clients is it serves a business purpose.
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How To Deduct Meals And Entertainment Expenses As A Business Owner
The value of meal and entertainment tax deductions has changed over the past few years. With the ratification of the 2018 Tax Cuts and Jobs Act (TCJA), aka the Trump Tax Plan, entertainment expenses can no longer be deducted. Similarly, ticket costs are no longer deductible if you take clients to a sporting event or Broadway show.
There are other ways to deduct some expenses that qualify for a Meals and Entertainment Tax deduction.
2023 / 2024 Meals and Entertainment Allowable Tax Deductions
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The meals and entertainment tax deduction rules are the same for tax years 2023 and 2024.
It will be helpful to know what still qualifies for the meals and entertainment tax deduction in 2023 and 2024. Here are some potential dining expenses that may be half to fully deductible when incurred by your business.
· Food for company holiday parties (100%)
· Food and beverages given to the public (100%)
· Dinner for employees working late at the office (100%)
· Business meals with clients (50%)
· Food items for the office (50%)
· Meals while traveling for work (50%)
· Meals at a conference (50%)
Your Guide To Meal Tax Deduction For 2023 And 2024
For 2023 and 2024, most business meals are only 50% deductible, according to the current IRS rules. Let’s say you take your favorite client to a beautiful lunch (to discuss business); you can deduct half the cost of the meal. On the other hand, if you go out for a meal with a client with no business purpose, the meal is not deductible.
The change to the meal deduction could cause some confusion since meals were 100% deductible in 2021 and 2022. This was a temporary change to help boost spending at restaurants during the Covid-19 pandemic.
How To Document Your Tax-Deductible Meal Expenses
If you want to deduct a business meal that costs more than $75, you must keep receipts or documentation of the meal expense. For meals below $75, the IRS does not require you to keep receipts to document the expense. Either way, you will still want to keep a record of your deductible meal, including the following information: date of the meal, total including tax and tip, name of the restaurant, details of the business meal (who attended and how it related to your business).
Your Guide To The Entertainment Tax Deduction 2023 And 2024
Unfortunately, most entertainment expenses are no longer deductible.
Here are some of the most common exceptions that may still be tax deductible in 2023 or 2024—expenses for events like the company holiday party, rewards trip, or costs tied to business meetings (think chamber meetings, professional associations, or even a conference). Also, if you sell entertainment to your customers, there are exceptions to the entertainment deductions.
For example, a bar owner paying a band to perform for customers would likely be a deductible business expense. Buying tickets to see Taylor Swift perform (with or without clients) would not be deductible. If you took clients to dinner first, and discussed business, the meal would likely be deductible.
How To Make Up For Reduced Meal Deductions In 2023 And 2024
Make sure you have the best retirement plan for your small business. Look to increase your contributions to your 401(k) plan. You can contribute up to $69,000 to your Solo 401(k) in 2024, more if you are 50 or older. Consider setting up a Cash Balance Pension Plan if you need even more valuable tax deductions. The pension plan could allow you to sock away several hundred thousand dollars annually (depending on your age and income).
