Meals and Entertainment Changes Under the Tax Cuts and Jobs Act

office holiday party

OH NO! Are the HOLIDAY PARTIES still DEDUCTIBLE?
In general, the new Tax Act provides for stricter limits on the deductibility of business meals and entertainment expenses. Under the Act entertainment expenses incurred or paid after December 31, 2017 are nondeductible unless they fall under the specific exceptions in Code Section 274(e).  One of those exceptions is for “expenses for recreation, social, or similar activities primarily for the benefit of the taxpayer’s employees, other than highly compensated employees”  (i.e. office holiday parties are still deductible).

Business meals provided for the convenience of the employer are now only 50% deductible whereas before the Act they were fully deductible. Barring further action by Congress those meals will be nondeductible after 2025.


Businesses should keep the new rules in mind as they plan their 2018 meals and entertainment budgets. 

2018 Expenses – New Rules

  • Office Holiday Parties – 100% deductible
  • Entertaining Clients – Meals 50% deductible / No deduction for entertainment expenses
  • Employee Travel Meals – 50% deductible
  • Meals Provided for Convenience of Employer – 50% deductible (nondeductible after 2025)

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Will Trump Sign the Newly Passed Tax Bill before Christmas as Promised?

Will this still be an early Christmas Gift for the Taxpayers?

new years at white house

Trump may wait until January to sign the tax bill into law.   The reason this may happen is because once this tax bill goes into law it will add to the deficit and when that happens it will trigger a 2010 law known as “PAYGO,” or “pay-as-you-go.”   Once this happens the budget law will require spending cuts to Medicare and other programs.  The reductions would cut spending on Medicare by $25 billion in 2018, according to the Congressional Budget Office.

If Trump signs the tax bill into law in January it would likely defer those spending cuts until 2019,  giving Congress almost a year to come up with a solution.

So what will the Taxpayers get out of the tax saving plan.  Well, let’s see!

In 2018, taxpayers earning less than $25,000 would receive an average tax cut of $60, the nonpartisan Tax Policy Center found.  Those earning between $49,000 and $86,000 would get an average cut of about $900; those earning between $308,000 and $733,000 would receive an average cut of $13,500; and those earning more than $733,000 would receive an average cut of $51,000.

And in 2025 these tax cuts will expire for individuals but the corporations tax cuts will remain permanent.

Happy Holidays Everyone!!!!

 

The Christmas Tax Bill

 

Senate Republicans passed President Donald Trump’s tax plan on December 2, 2017. Republicans still have a lot of differences between the House and Senate tax bills to compromise on.   The House and the Senate have to pass the “same” tax bill.   So which one would be “better.”   Better for whom, would be the question to ask.

I’m going to keep this simple for now.   After this bill is put into law that’s when things will get complicated.    But for now I will go over just a few things that make the House tax bill and the Senate tax bill different.

Family and Child Tax Credit
The House bill expands the credit to $1,600 per child and begins to phase it out for married couples making more than $230,000.   The Senate bill expands the credit to $2,000 per child, with a phaseout beginning at $500,000 of a couple’s income.

Mortgage interest deduction
The Senate bill keeps the limit for the mortgage interest deduction in place for homeowners  for  the first $1 million of home debt.   While the House bill caps it at the first $500,000 of debt.

Medical and Student Loan Deductions 
The House bill eliminates deductions for high medical expenses and student loan interest.  The Senate bill would leave the aforementioned deductions, intact.

The Affordable Care Act (ObamaCare)
The Senate bill repeals the Affordable Care Act requirement that individuals buy health insurance coverage.   Currently, the mandate is enforced via a tax penalty for people who fail to purchase coverage.  The House bill does not touch the mandate.

Trump predicts final passage before Christmas…..