Question

Calculate the allowable business expense deduction for Tax Year 2025 if John has business expenses of $2,500 for entertainment and $1,200 for meals while traveling for business.

Answer 1

For the Tax Year 2025, the treatment of business expenses for meals and entertainment remains largely in line with the guidelines established by the IRS.

1. **Meals**: Generally, meals that are ordinary and necessary for business purposes are deductible at 50% of the actual cost. However, if the meals are provided at a business-related event or are directly associated with business activities, the deduction can be up to 100% (this may vary by specific situation or changes in tax law).

2. **Entertainment**: As of the changes made by the Tax Cuts and Jobs Act (TCJA) starting in 2018, entertainment expenses are not deductible.

Given John's expenses:
- **Business Meals**: $1,200 with a deduction of 50% (assuming they are not categorized to qualify for 100% deduction):
\[
\text{Deduction for meals} = 1,200 \times 0.50 = 600
\]

- **Entertainment**: $2,500 (not deductible):
\[
\text{Deduction for entertainment} = 0
\]

Thus, the total allowable business expense deduction for John for the Tax Year 2025 would be:
\[
\text{Total Deduction} = \text{Deduction for meals} + \text{Deduction for entertainment}
\]
\[
= 600 + 0 = 600
\]

Therefore, John's allowable business expense deduction for Tax Year 2025 is **$600**.