July 03, 2018 | Posted in:

Hosting a Summer Company Picnic? Know the Tax Benefits

Are you planning on treating your employees to a summer outing? It might be a picnic or barbecue for the Fourth of July or a team-building activity to improve morale and culture.

Despite recent tax law changes eliminating most entertainment and meal deductions, your business can still deduct qualified expenses if certain requirements are met. In fact, you might be able to write off the entire cost.

New Tax Law Changes: What to expect for 2018

Most entertainment and meal expenses have been repealed, beginning in 2018. In addition, the tax benefits for company-provided eating facilities, like cafeterias or dining rooms, have been reduced. For 2018 through 2025, the deduction for these facilities is cut from 100 percent of the cost to 50 percent, before disappearing completely in 2026. Nonetheless, this remains a tax-free benefit to employees.

See our Infographic on Meal & Entertainment Deductibility Changes with Tax Reform

Under prior law, you could generally deduct 50 percent of the cost of your company’s qualified entertainment and meal expenses. For instance, if you held a business meeting with a client in the afternoon and then treated the client to dinner and drinks at night, the costs were deductible.

Yes, picnics are still deductible

The tax law changes don’t affect a special tax law provision that says you can deduct 100 percent of the cost for company picnics and similar gatherings. This provision wasn’t affected by the other tax changes in this area. Just remember: To qualify for this deduction, you must invite the entire staff to the picnic. In other words, you can’t restrict the outing to a select group.

For instance, suppose a few friends or relatives crash the party. This won’t jeopardize the overall deduction, but expenses attributable to those social guests are nondeductible. For instance, if the picnic costs $5,000 for 48 employees and two guests show up, you can deduct $4,800 (96 percent of $5,000).

This is a unique opportunity to take advantage of a tax break while rewarding employees. Book it on your summer schedule. Give us a call if you have questions.


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