Here’s how the Tax Cuts and Jobs Act (TCJA) applied its tax reform to your supper money meal allowance and the four rules that give you the tax deduction.
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.
The regulations allow supper money as an excludable fringe benefit when the benefit satisfies the following four conditions:
- You provide the benefit only occasionally.
- You pay no more than a reasonable amount.
- The meal enables you or the employee to work overtime.
- 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. (This makes for unhappy employees.)
If you would like my help with your supper money payments, please reach out to your team at Luster Tax Consulting to discuss.