The Tax Cuts and Jobs Act passes last December brought about many changes for small business owners. One of those changes affects fringe benefits, which in turn can affect your bottom line as well as your employees’ deductions.
Here are some of the key changes by the Tax Cuts and Jobs Act you can expect to see:
Under the new law, qualified bicycle commuting reimbursements are deductible as a business expense. Qualified bicycle commuting reimbursements from an employee’s income are now allowed; which means employers must now include these reimbursements in an employee’s wages.
Employees that are awarded tangible personal property as an achievement award can now exclude these from their wages. Employers are also allowed to deduct the awards that are tangible personal property. However, these deductions will be subject to certain deduction limits. The new law clarifies the definition of tangible personal property.
Most of the deduction for expenses related to activities generally considered entertainment, amusement or recreation have now been eliminated. However, as a business owner, you can still deduct 50% of the cost of business meals if you or an employee are present, and the food or beverages are not considered lavish or extravagant. This deduction is meant for meals provided to a current or potential business customer, client, consultant or similar business contact.
Another important aspect to keep in mind is that any food or beverage purchased during entertainment events will not be considered entertainment if the food or beverage is purchased separately from the entertainment. You will need to either have a separate bill, invoice or receipt or an itemized receipt or bill listing them separately.
Moving expenses provided to your employees are also changing. Now you must include any moving expense reimbursements in employees’ wages. The new tax law suspends the exclusion for qualified moving expense reimbursements.
However, there is one exception to this rule. Members of the U.S. Armed Forces can still exclude qualified moving expense reimbursements from their income if they meet certain requirements.
Deductions for expenses associated with qualified transportation fringe benefits or expenses incurred providing transportation for commuting are also no longer allowed. The exception to this rule is if the transportation expenses are necessary for employee safety.
Taxes can be complicated, especially when there are changes coming down the pipe. Ensure you are prepared by doing a check-up with your qualified tax professional as soon as possible. Doing so will help make your business life financially simple.