Accounting for T&E Under the New Tax Rules

Updated 6/28/2018 with additional expense categories

The new tax law has made many changes to the rules we’ve come to know and love, and while the implementation of many of the new rules are still being ironed out, there is something that you can do today to get your bookkeeping ready for the new tax code. Whether you have kept all of your Travel, Meals, and Entertainment expenses in a single account in the past or segregated into separate accounts, going forward, you should make sure to keep these expenses segregated as follows:

  • Travel – Business travel, airfare, hotels, etc
  • Meals (non-office) – Taking clients, vendors or employees out for a meal or drinks
  • Meals (office) – Meals purchased for employees and eaten by employees in the office, for the convenience of the employer (e.g. providing dinner for employees who work late)
  • Travel meals – Meals purchased for an employee who is traveling on company business
  • Office events – Meals provided to employees during a company event, such as a firm picnic or a quarterly staff meeting
  • Entertainment (tickets to a ball game or show, golf, etc)
  • Free to the public – Food and drink provided to the public, for free, for promotional purposes

Note – If your expenses are already segregated to this level (or to a more detailed level), there may not be a reason to make any changes, just make sure to have at least this level of detail.

Why is this necessary?

This is necessary because the new tax law treats each of these items differently:

  • Travel – 100% deductible
  • Meals (non-office) – 50% deductible
  • Meals (office) – 50% deductible
  • Travel meals – 50% deductible
  • Entertainment – Non-deductible
  • Office events – 100% deductible
  • Free to the public – 100% deductible

Keeping these items segregated will make it easier, come year-end, for your accountant to prepare your tax return!

Not sure about something you’ve read? Interested in implementing new accounting systems or updating your existing systems? Let us know, we can help!