Many of the changes made by the Tax Cuts and Jobs Act of 2017 benefit businesses. However, some of the changes may make it more difficult for businesses to write off certain expenses. For example, changes in the entertainment deductions for 2018 may cost companies thousands of dollars, especially for companies who have a strong sales department that entertains clients and potential customers on a regular basis. A DC business tax attorney can help make sense of the changes to the tax code. To begin, let’s explore five things you may not know yet about the entertainment deduction for 2018.
Five Things You Need to Know About Changes to Tax Laws Regarding Entertainment Deductions
1. Business Meals are Not Deductible.
Business meals for clients, prospects, business associates, customers, and other business-related contacts is not deductible at all unless legislators correct the oversight by allowing a deduction of these meals. Because the oversight to allow a specific deduction of business meals, you should track these expenses throughout the year and carefully document the expenses in case these deductions are allowed.
2. No Deduction for Entertainment, Recreation, or Amusement Related to Business.
The new tax law does not include a deduction for the cost of any activity related to entertainment, amusement, or recreation, even if the cost is directly related to your business. Therefore, you cannot deduct the cost of a round of golf, sports tickets, fishing, skybox rental, club memberships, or theater tickets. For some business owners, this change in the tax code could impact business, especially for sales-related companies.
3. Some Entertainment Deductions are Available.
Employers can pass along the cost of amusement, entertainment, or recreation expenses for employees as income. This deduction is not necessarily good news for an employee because the amount is added to the employee’s W-2 wages.
4. Employers Lost Some Deductions Related to Employees.
Before the changes to the tax code, an employer could deduct the full cost of providing lunches to employees at work. Now the deduction is limited to 50 percent of the actual cost of providing the meal. In addition, the cost of parking passes for employees at garages is no longer deductible. Some employers may decide to pass the expense for items that are no longer deductible to employees.
5. Some Membership Dues and Fees are Still Deductible.
Not all membership dues and fees are nondeductible. Some fees and dues can be included as “professional dues and meetings” so that the expense can be deducted. Organizations that may qualify for this deduction include:
· Professional organizations
· Trade boards
· Trade associations
· Business leagues
· Public and civic service organizations
· Chambers of Commerce
Your DC business tax attorney can help you identify organizations that qualify for a deduction.
Contact A DC Business Tax Attorney for Help
The changes in the tax code are confusing for many business owners. As the IRS and other agencies provide additional instructions and resources, some matters may become clearer. However, many businesses need help now. DC business tax attorney Steve Thienel is dedicated to assisting clients in Maryland, Virginia, and throughout the DC Metro area. Contact Thienel Law, LLC today for assistance with maximizing your tax deductions and savings under the new tax law.