The breakdown below shows the changes and limits imposed on deductions for Business Meals & Entertainment and Travel under the Tax Cuts and Jobs Act for tax year 2018.

  • The biggest change is to expenses for the entertainment of clients for business purposes which for 2017 was deductible at 50%. Starting January 1, 2018, no deductions are allowed for entertainment expenses.

     

  • Meals provided for the convenience of the Employer was 100% deductible in 2017, as long as it was not included in an employees’ gross income as fringe benefits. If included it was 50% deductible. For 2018, this is only 50% deductible and is set to become a nondeductible expense after tax year 2025.

     

  • There are no changes to the business meal deduction which remains at 50% and office holiday parties and other social company events which remains at 100%

     

  • With the disallowing of miscellaneous itemized deductions employee business expenses are also no longer deductible on their individual tax returns. Expenses reimbursed to the employee by their employer that are not covered under an accountable plan are now taxable to the employee and must be included in their gross income and reported in box 1 taxable wages on their W-2.

     

  • If an employee is reimbursed under an accountable plan for business expenses, then the employer does not report it as income to their employee and the employer can deduct on tax returns the expenses after the 50% reduction for meals.

     

  • The business mileage rates for 2018 compared to 2017 are shown below:

     

    • 54.5 cents for every mile of business travel; 53.5 cents per mile in 2017

    • 14 cents per mile driven in service for a charitable organization; no change from 2017

    • 18 cents per mile driven for medical purposes; 17 cents per mile in 2017

    • NO 2018 standard mileage rate for moving related travel due to the suspension of deductions for all moving related expenses; was 17 cents per mile in 2017

The above information is of a general nature only and should not be relied upon for specific situations. Click here for additional tax services information.

Call Marlies Y Hendricks CPA PLLC at either 716-694-3500 or 910-769-8730 as required to set up an appointment.