The major changes to entertainment and meal expense deductions brought about by the Tax Cuts and Jobs Act (TCJA) in 2017 may be a distant memory for many freelancers, but the IRS is still in the process of finalizing them, a move that may impact your tax obligations.
The original guidance under the TCJA essentially eliminated the deductions for entertainment expenses but still allowed businesses to deduct expenses related to food and beverages within certain parameters. The final regulations reintroduce some limited deductions for entertainment, amusement, and recreation activities. In addition, the IRS is providing additional information on what exactly constitutes an entertainment expense and the limitations on food and beverage expenses.
This guidance applies for expenses incurred after December 31, 2017. Under the TCJA, if they are incurred and paid after Dec. 31, 2025, they will not be deductible at all.
These are the key clarifications from the final regulations issued by the IRS that may impact freelancers:
· Certain recreational activities for the benefit of employees, reimbursed expenses, and entertainment treated as compensation to an employee or includible in the gross income of a nonemployee as compensation for services or as a prize or award (and reported by the taxpayer as such)