BUDGETING FOR BUSINESS - TAX BREAKS
Tax cuts and Jobs Act
BUDGETING FOR BUSINESS
The way you used to do business may need to be tweaked. The Tax Cuts and Jobs Act (TCJA) affected some things you may need to consider. If you were one who would take your clients and employees out to restaurants and provide entertainment from time to time, you need to understand the new changes that could affect the way you would take that deduction on your taxes.
Firmer guidelines will result in changes affecting client-related business meals, employer-provided business meals, employer-hosted activities, and entertainment.
The American Institute of CPAs stipulates that under the guidelines of the American Institute of CPAs, business meals that take place between a business owner or employee and a current or prospective client; are not lavish or extravagant under the circumstances; and where the taxpayer has a reasonable expectation of deriving income or other specific trade or business benefit from the encounter, are not disallowed under Sec. 274(k). If you keep it reasonable, you can still be entitled to the 50% deduction.
As business owners, we love to treat our employees to meals, especially when there is a working lunch needed. But, does TCJA affect us in doing this? The TCJA limits the deduction for employer-provided meals to 50% for the amount paid from 2018 through 2025. In 2026, it will completely go away. Keep track of your expenses in this category.
Keeping Everyone Entertained
It makes sense to give your employees and clients a little break from time to time and build relationships. It can also help to keep clients happy. But, the TCJA did change this. You were once able to do a 50% deduction. That is no longer allowed. You need to consider this change when you are making budgets.
It does appear that expenses for holiday parties and similar activities will continue to be fully deductible as a business expense.
About JHM Certified Public Accountants
Since its founding in 1977, JHM Certified Public Accountants has grown to specialize in accounting, auditing and tax services to nonprofit organizations. Additionally the firm serves a diverse range of business clients throughout the Southeast Tennessee/North Georgia region, ranging from small start-ups to large corporations, with a significant concentration of clients in the construction, hospital, nonprofit / governmental and assisted housing industries.