There is so much good in the business world from the new tax laws that we feel bad to even mention this, but we did lose some deductions that had become automatic in so many minds that we feel we must!
As business people ourselves and for as long as we can remember, taking a client or prospect out to eat or to a round of golf or a concert has always been how business is done! Then tax deducting it is also how business got done…NOT ANY MORE! It’s time to review the old and new tax rules, and perhaps nothing changes, as business getting done first always trumps (no pun intended), and deducting it was a pleasant after-effect. Perhaps the fact that deducting meals with prospects was allowed you to splurge a little more and buy the Surf & Turf instead of just the Turf! Deducting golf justified golfing instead of working, so now you just need to do it without justification. After all it’s still golf! Getting a 20% deduction on all your business profits under the new “QBI” Qualified Business Income rule will more than cover the loss of deductions in these areas for the majority of us. But when buying more equipment, hiring more staff, giving pay raises or other additional bonuses all gets accounted for, keeping up old habits without realizing that it’s no longer deductible might be an unpleasant step backward on your K-1, so let’s simply review.
Under the new law, for amounts paid or incurred after December 31, 2017, deductions for business-related entertainment expenses are disallowed. Meal expenses incurred while traveling on business are still 50% deductible, but the 50% disallowance rule will now also apply to meals provided via an on-premises cafeteria or otherwise on the employer’s premises for the convenience of the employer. After 2025, the cost of meals provided through an on-premises cafeteria or otherwise on the employer’s premises will be nondeductible.
|2017 and before it was:||2018 New Rules|
Office Picnic`s or Events
|100% deductible||100% deductible|
|Entertaining Clients||50% deductible||Meals – 50% deductible|
|Event tickets, 50% deductible for face value of ticket; anything above face value is non-deductible||No deduction for entertainment expenses|
|Tickets to qualified charitable events are 100% deductible|
|Employee Travel Meals||50% deductible||50% deductible|
|Meals Provided for Convenience of Employer||100% deductible provided they are excludible from employees’ gross income as fringe benefits; otherwise, 50% deductible||50% deductible
(nondeductible after 2025)
|Fringe Benefits||Businesses could deduct the cost of employee parking, transit passes and bike commuting reimbursements, and employees could exclude the benefit from income.
Employee awards could consist of anything within a dollar limit of $400 per award and $1,600
|Businesses can no longer deduct the cost of employee parking and transit passes, biking is still ok!
Employee achievement awards must be tangible personal property and not cash or other forms of cash(gift cards). The dollar limits are the same.