The Tax Cuts and Jobs Act modified the rules relating to the
deductibility of entertainment expenses. In general, entertainment
expenses are not deductible under 274(a). Exceptions to this rule exist,
however, for certain entertainment expenses incurred for the benefit of
employees. Under 274(e)(4) entertainment expenses primarily for the
benefit of employees, other than employees who are highly compensated
employees are 100% deductible.
For purposes of this exception,
highly compensated employees are defined under 414(q) as any employee
who 1) was a 5% owner at any time during the year or the preceding year,
OR 2) for the preceding year had compensation from the employer in
excess of $220,000 for 2018, $225,000 for 2019 or $230,000 for 2020 AND
was in the top 20% compensated employees paid during this year.
entertainment expenses incurred primarily for employees in the lower
80% of compensation (unless a 5% or more owner) are 100% deductible.
of entertainment expenses that are primarily for the benefit of
employees who are not highly compensated employees that are 100%
Department gatherings and outings
Event tickets (sporting, theater, etc.)
Should you have any questions please contact your RubinBrown trusted business adviser.