Are you a business owner that takes customers or potential clients out for dinner or entertainment? Or do you support your nonprofit organizations locally through their fundraising events?
If so, please be aware that the write-off laws have changed in 2018. Where as in the past you used to be able to write off 50% of your entertainment or meal costs and 100% of your charitable donations, the new tax law has required that no entertainment be written off and only meals for travel are 50% deduction.
And now charitable organizations would need to break out the total cost of the ticket price to show how much covers the actual event expense and how much is over and above, and only the amount over and above the expense is able to be written off.
So if you’re counting on these tax deductions to help you save this coming year be aware that that’s not possible anymore. The only thing that you can do is if you have some special meal, such as in a celebratory event, you can still get a portion of that write-off as well. Or again, if you’re traveling for a seminar or things like that, you can still have that written off.
But it’s really important for you to also make sure that the nonprofit organization gives you a breakdown for the ticket price so you can at least write off the portion over and above the expenses they incur for that deduction.
It’s also really important that your bookkeeping would track all of this properly. If you just lump everything into a meals and entertainment account, the CPA is not going to know which ones really still qualify for the 50% write off and what is no longer deductible.
So it’s important to get your bookkeeping line items in order. If you have questions regarding this topic, you should reach out to your CPA to find out how these changes are going to impact your tax return. And if you need help getting your bookkeeping completed or understanding how to set up your chart of accounts, we’re always here to help.
UPDATE: The IRS has said that if you attend an event and can split the cost of entertainment and food through itemizing costs, the food portion is 50% deductible although the entertainment is still not deductible. So ask for a bill breaking out the different costs to allow you to write off some of the expense.
You can reach out to us on our website at abandp.com or give us a call at 310-534-5577. Thanks so much and have a great day!
