Business Expenses and the New Tax Law

The Tax Cuts and Jobs Act of 2017 includes some important changes related to deducting business expenses. Although the provisions of the new law are similar to those of the prior one with reference to allowing businesses and business owners to deduct certain expenses related to doing business, there are a few items that are specifically excluded by the new legislation. In addition, the current tax law completely eliminates the individual tax deduction for unreimbursed employee expenses, a major loss for many taxpayers who itemize their deductions on Schedule A.

One item in the Tax Cuts and Jobs Act that has been surrounded by confusion is the ability of businesses and business owners to claim a tax deduction for entertainment and recreation expenses. While the prior law allowed 50% of these expenses to be deducted if these were directly related to doing business, the wording of the new law is generally interpreted as restricting this tax break. Most tax professionals agree that the 50% allowable tax deduction for business-related meals is still in place although there is some confusion as to how it should be claimed when it is associated with some type of entertainment. Some maintain that the meal expense cannot be claimed if it is associated with entertainment while others interpret the legislation as allowing the meal portion of the expense to be deducted as long as it can be clearly separated from any associated entertainment expenses.

In addition to disallowing a business tax deduction for entertainment and recreation charges, the new tax law makes several other changes which fall under the general heading of business expenses. One of these is the elimination of the individual income tax deduction for unreimbursed job-related expenses, a deduction that was allowed under the prior tax law. According to the new legislation, individual taxpayers can no longer claim out-of-pocket expenses for such things a transportation, meals and lodging, items that could previously have been claimed on the taxpayer’s Schedule A. Another change to allowable business expense deductions relates to de minimis benefits such as coffee, snacks or office lunches that employers might provide for their employees. The deduction for these expenses, which were 100% deductible under the prior tax law, has now been reduced to 50%.

Further clarification on some of these business expense items is likely to be provided as time goes on, making it is more important than ever for both businesses and individuals to keep very good records so that they are prepared to take whatever deductions are allowed once the 2019 tax season gets underway. Meanwhile, the Certified Public Accountants and Enrolled Agents at Los Angles Bookkeeping are keeping abreast of any and all guideance released by the IRS as it relates to business expenses and as well as all other tax deductions. In doing so, they stand ready to help both business and individual clients achieve the maximum tax advantage possible on their 2018 returns! 

Conveniently located in Beverly Hills, California, Los Angeles Bookkeeping employs Certified Public Accountants, licensed Enrolled Agents and professional bookkeepers. This group of certified professionals has the knowledge and expertise necessary to help business clients take full advantage of the business tax deductions allowed under the provisions of the Tax Cuts and Jobs Act. So don’t wait!! Contact the tax experts at Los Angeles Bookkeeping today to schedule a free, no obligation consultation. Take the first step toward saving valuable tax dollars by contacting us at (714) 509-5683 or james@labookkeeping.com.