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Travel & Expense Deduction Updates

Since the Tax Cuts and Jobs Act was passed into law in January, many clients are wondering how the new bill affects them. The new law significantly changes the deductibility of meals, entertainment, and transportation expenses for businesses beginning in the 2018 tax year. In the graph below, we provide a comparison of what has and has not changed in regard to travel, meal, and entertainment expenses.



 

2017 Expenses

(Old Rules)

2018 Expenses

(New Rules)

Office Holiday Parties

100% Deductible

No Change

Food & Beverage (such as meals consumed while employees are traveling)

50% Deductible

No Change

Client Entertainment

50% Deductible

No deduction for entertainment expenses

Tickets to Entertainment Events

50% Deductible for face value; 100% Deductible for qualified charitable events

No deduction for entertainment expenses

Meals Provided for Convenience of Employer (such as on-site cafeteria)

100% Deductible provided they are excluded from employees’ gross income as de minimis fringe benefits; otherwise, 50% Deductible

50% Deductible (Nondeductible after 2025)

Subsidized Parking and Transit Reimbursement

100% Deductible

No deduction for parking and transit reimbursements

Employer Provided Transportation

(such as a car service)

100% Deductible

No deduction provided for transportation, unless the transportation is necessary for the employee’s safety



What should you do now? Consider creating separate ledger accounts for each category of expenses to include business meals, entertainment, social/recreational employee expenses, and employee meals so that you can maximize your deductions. As always, please don’t hesitate to reach out to your Cole Gavlas, PC advisor with questions or for clarification on the new laws.

 

They do all the number stuff...but they care about more than just my business.
William Boyle