How to Deduct Mileage, Meals & Entertainment from Taxes in 2019
Business deals do not always happen at a desk or behind the screen of your laptop, but rather in restaurants, coffee shops or entertainment venues. Since the recent Tax Cuts and Jobs Act of 2017, certain entertainment of clients is no longer considered deductible by the IRS. Gone are the days of taking in a game of golf or enjoying tickets to the next big sporting event as these no longer are a deductible expense. However, certain dinners and lunches with clients are still considered permissible. Depending on your access to public transportation, you may need to drive your vehicle or rent a car. Have you ever claimed those miles along with the rest of your business mileage on your taxes? From entertaining, meals and mileage, there is much to consider while running your business when it comes to tax deductions.
What Entertainment Expenses Are 100% Deductible?
Your company holiday party survived the chopping block and is still 100% deductible. So that tacky holiday sweater hanging in your closet – don’t get rid of it just yet.
How about 50%of Deductible Expenses?
This area has more opportunities for when your expenses can be deducted. If you decide to treat that client to a meal (within reason) or meals at a conference, your deduction is 50%. Also, if you or your team travels or if you decide to treat a few employees to a meal, those events meet the IRS requirement. Your organization might be a nonprofit or one that requires a board and meals served at the board meeting are covered at the 50% rate.
What Is Nondeductible?
Before 2017, many of the meals, country club dues and trips to the golf course with clients were 100% deductible. Now, many of those events – including tickets to charitable events – no longer can be written off like before. Not everything you do to recruit business or develop relationships is considered deductible by the IRS. In most cases, work-related meal purchases are either 100 or 50 percent deductible come tax time, but here are a few exceptions:
- Client’s Night Out – If you choose to pay for your client’s night out but you do not actually go with them, it’s considered nondeductible.
- Friends and Family – When you treat a client to a meal and you invite friends or spouses; the cost of your friends or spouse is nondeductible. However, you can write off half of the client’s meal.
Due to the Tax Cuts and Jobs Act, this deduction may change in 2025 to a nondeductible item. If you have any questions, your team at Brightwork is here to help you through the tax process.
For a quick reference, here is a quick chart explaining the differences in deductibles:
|Type of Expense||Deduction|
|Occasions that entertains clients (golf games, concert tickets, etc.)||0% deductible|
|Business meals with clients||50% deductible|
|Office snacks and meals||50% deductible|
|Company-wide party||100% deductible|
Depending on where your place of work is located, you may need to utilize your car to meet clients or conduct business. Make a decision early on if you plan to go with the standard mileage rate or try to deduct the actual expense incurred by driving your vehicle. A few key points to consider:
- Should the vehicle used for your company be owned by the company, the business owner or the individual employee?
- Is your business at a point that the company could buy or lease vehicles for company use
Whenever you use your vehicle to drive from the office to a client meeting, bank, store, etc. these miles qualify for the business mileage deduction. However, driving from your home to work and vice versa is considered commuting. You may not deduct this expense on either your business or individual return at tax time.
What defines a business vehicle?
The IRS considers anything that is a car, truck or SUV used for company business. There are vehicles that do not receive a deduction including vehicles for taxis, airport transportation cards or larger vehicles like a dump truck.
Luxury automobiles recently fall into this category, so not only is your Rolls Royce or Ferrari not deductible, but also new or used cars. The maximum first-year depreciation that a business owner can claim for a new or used car is $10,000 as well as an additional $8,000 in bonus depreciation. Depending on your situation, you may deduct the interest of the auto loan, registration and property tax fees, parking, and even your toll road expenses under the umbrella of a standard mileage rate deduction. The key is proving that they are for a business expense. Also, your gas, oil, tires, and maintenance or repairs do qualify amongst many other items. Connect with our team at Brightwork if you have any questions on what qualifies as a legitimate deductible expense.
How We Can Help
Brightwork can be your resource in helping you decide which business expenses are 100, 50 or 0% during the course of the business year. The IRS is particular when it comes to the cost of mileage. If you do plan to use the IRS vehicle deduction, you will need to keep a detailed log of your business miles and other expenses. Come up with a system that will keep you organized. There are some great apps such as Hurdlr or SherpaShare to help you track your miles. Even the old-fashion vehicle expense log book works just as well.
As you can see, there are many important items to keep track of for you to receive the maximum benefit of the tax deductions afforded to your business. Connect within one of our engaging team members today to get the answers you need to run a better business.