TCJA Changes to Your Tax-Free Supper Money

The recently enacted Tax Cuts and Jobs Act (TCJA) has altered the tax landscape for a lot of individuals and businesses. The changes are extensive and this blog provides a high-level overview of some of the highlights to keep you informed. Due to the sweeping nature of the changes and the need for continued guidance, we’d like the opportunity to have a personalized conversation with you now to discuss planning opportunities for your specific situation. Additional conversations and tax projections are likely necessary to ensure we maximize your tax benefits. Please call our office at your earliest convenience to schedule a meeting.  

​Here’s how the TCJA applied its tax reform to your supper money meal allowances. Before tax reform, you deducted 100 percent of the supper money cost. Now, because of tax reform, your tax deduction for supper money is subject to a 50 percent cut for amounts paid during tax years 2018 through 2025.

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​The regulations allow supper money as an excludable fringe benefit when the benefit satisfies the following four conditions:
 

1. You provide the benefit only occasionally.
2. You pay no more than a reasonable amount.
3. The meal enables you or the employee to work overtime.

1. You do not calculate the benefit based on the number of hours worked. For example, a $20 allowance per hour of overtime is a no-no. You can’t do that. The way to provide the benefit is to give a discretionary meal allowance, such as $56.

 
If the payment of supper money does not meet the four rules, it is taxable compensation to the recipient, and if that’s an employee, the money is subject to withholding and payroll taxes.
 
Corporate owners and the self-employed qualify for the supper money allowance under the four rules explained above. The law does not discriminate. It makes supper money available to all who work in the business.