(Thanks to the Bradford Tax Institute for this Great Breakdown of Meals and Entertainment): As you know from “Tax Reform Wipes Out 50 Percent Business Entertainment Deductions” yesterday, you may no longer deduct directly related or associated business entertainment. Common forms of directly related and associated entertainment that are no longer deductible include business meals with clients or prospects, golf, football games, and similar business-building activities. That’s the bad news. The good news is that tax code Section 274(e) pretty much survived the entertainment bloodletting. Under this section, you continue to deduct: *entertainment, amusement, and recreation expenses you treat as compensation to employees and that are included as wages for income tax withholding purposes; *expenses for recreational, social, or similar activities (including facilities therefor) primarily for the benefit of employees (other than employees who are highly compensated employees); *expenses that are directly related to business meetings of employees, stockholders, agents, or directors (here, the law limits expenses for food and beverages to 50 percent); *expenses directly related and necessary to attendance at a business meeting or convention such as those held by business leagues, chambers of commerce, real estate boards, and boards of [...]
Tax Musings of a Burbank CPA: Tax Reform Wipes Out 50 Percent Business Entertainment Deductions
(Thanks to the Bradford Tax Institute for this Great Breakdown of Meals and Entertainment): Lawmakers destroyed a big chunk of usual and normal business entertainment on January 1, 2018. The good news is that some not-so-usual and not-so-normal entertainment survived the bloodletting. (See tomorrow’s Blog – “Tax Reform: Entertainment Deductions That Survived” for some of the survivors.) The bad news is that lawmakers massacred entertainment that was already handicapped by the 50 percent cut. For example, during 2017, you could take a prospect or client to a business dinner followed by the theater or a ballgame and deduct 50 percent of all the monies spent, providing you passed some tax law tests on business discussion and associated entertainment. Now, in what you thought was a business-friendly tax reform package, you find that lawmakers exterminated a big chunk of business entertainment as a business expense. Good-bye Traditional Entertainment The new law repeals-effective January 1, 2018-the tax code section that allowed a deduction for entertainment, amusement, or recreation that was directly related to, or associated with, the active conduct of your trade or business. Because of tax reform, you can no longer deduct entertainment that has as its mission the generation of [...]
Tax Musings of a Burbank CPA: When Your Child is Not Your “Child”and How to Possibly Profit!
As I am sure you have heard, Congress passed and the President signed into law the biggest federal tax reform bill since 1986. One of the new provisions you might be able to take advantage of is what the definition of a “child” is. Under the Tax Cuts and Jobs Act of 2017, the Child Tax Credit was increased from $1,000 to $2,000, of which $1,400 is actually refundable (meaning if your taxes get reduced before withholding to zero, up to $1,400 per child can be refunded to you). At the same time, the personal exemptions, a deduction of $4,150 per dependent (plus taxpayer and/or spouse) were repealed. At the same time a $500 “dependent” tax credit (usually called a family credit) is allowed for each “Qualifying Dependent” on the tax return (partially making up for the loss of personal exemptions.) (Simple, huh?) Now, the definition of a “Qualifying Dependent” is any dependent who is not a “Qualifying Child”, while any “Qualifying Child” is defined on the 1097 page Reconciliation Agreement that ended up becoming the bill signed by the president as anyone that qualifies for the Child Tax Credit, meaning a child under 17 that qualifies as your dependent. [...]