You likely have heard conflicting information on the deductibility of business meals with clients and prospects. We have spent time researching this issue, and our conclusion is that tax reform eliminated tax deductions for business meals with clients and prospects.
Tax reform did much damage to tax deductions for business entertainment and meal expenses. But meals served at business presentations survived the entertainment and prospect and client meal bloodletting. And not only did presentation expenses survive as deductions, but they also continue as 100 percent business expense deductions.
You likely know that the recent reform did away with business tax deductions for prospect and client golf. But did you know that charity golf is gone too? Buried in tax reform is the elimination of the 100 percent business deduction for charity golf and other special charitable sporting events.
Tax reform (Public Law 115-97) includes winners and losers. Employers who, for their convenience, provided business meals for their employees are losers—50 percent losers to start, and then total losers later.
You may no longer deduct directly related or associated business entertainment effective January 1, 2018.
First, lawmakers reduced the directly related and associated entertainment deductions to 80 percent with the 1986 Tax Reform Act. Later, in 1993, they reduced that 80 percent to 50 percent. And now, with the newest tax reform, lawmakers simply killed business deductions for directly related and associated entertainment effective January 1, 2018.
As discussed above, the 20 percent tax deduction under new 2018 tax code Section 199A is a very nice tax break for business owners, except for owners with high income who also fall into the out-of-favor group.
If your pass-through business is an in-favor business and it qualifies for tax reform’s new 20 percent tax deduction on qualified business income, you benefit at all times, including being above, below, or in the expanded wage and property phase-in range.
The new 2018 Section 199A tax deduction that you can claim on your IRS Form 1040 is a big deal. There are many rules (all new, of course), but your odds as a business owner of benefiting from this new deduction are excellent.
The office-in-the-home deduction produces good-to-excellent tax savings by turning personal house expenses into business deductions. Additionally, it enables you to deduct big vehicle expenses by eliminating nondeductible commuting mileage. But to qualify for the home-office deduction, you must use the office exclusively for the business or businesses for which you are claiming the deduction.