THE TAX CUTS AND JOBS ACT - PARKING, ENTERTAINMENT AND MEALS

The Tax Cuts and Jobs Act (‘the Act”) was signed by President Trump on December 22, 2017. The Act makes sweeping changes to the U.S. tax code and impacts virtually every business and individual taxpayer. Some business expense changes that will impact many of our clients are parking, entertainment, and meals.

 

Under the past law, the employer was allowed to deduct parking as an expense while allowing employees to receive this tax-free benefit. Effective January 1, 2018, The Act continues to allow the employees to receive the tax-free benefit but the employer now has to consider parking as a nondeductible expense.   

 

Because so many of our clients depend on entertainment as part of their business strategy to promote their businesses, we wanted to update you on the change made to entertainment expenses. Until December 31, 2017, businesses were allowed to deduct 50% of their entertainment expenses. As of January 1, 2018, the Act disallows a deduction for (1) any activity generally considered to be entertainment, amusement, or recreation; (2) membership dues for any club organized for business, pleasure, recreation, or other social purposes; or (3) a facility or portion thereof used in connection with any of these items.

 

Another area where many of our clients will be impacted is meals. Under the Act, taxpayers are still generally able to deduct 50 percent of the food and beverage expenses associated with operating their business.  For amounts incurred and paid after December 31, 2017, the Act expands this 50% limitation to all meals, including on premise dining which was previously 100% deductible.

 

Until December 31, 2017, individuals who are not reimbursed by their employer for business promotion or travel, deducted travel, business meals, and entertainment under miscellaneous expenses on Schedule A. As of January 1, 2018, miscellaneous expenses are no longer deductible at all. 

 

These are just highlights of some of the changes and impact of the Tax Cuts and Jobs Act. There is much more to discuss than can be covered in this letter. Tax reform is further complicated because many of the changes are temporary, generally ending after 2025.  We are focused on both the immediate and long-term impact of the Act on your situation. Please call our office for guidance on all of the provisions that directly affect you.