Managing My Business
Take Advantage Of 2019 Business Tax Changes
Date:06 February, 2019
Recent changes to the Tax Cuts and Jobs Act potentially benefit small businesses by enabling them to immediately expense more of the cost of certain property and write off most depreciable assets in the year they are placed into service. Changes affecting just about every business going forward through at least 2025 include tax rate changes for pass-through entities, changes to the cash accounting method and limits on certain deductions.
- Under the new law, businesses can immediately expense property and deduct it in the year it’s placed in service. In addition, the maximum deduction has increased from $500,000 to $1 million. Property can include business equipment and machinery, office equipment, livestock and qualified real property.
- First year bonus depreciation—temporary 100 percent expensing for certain business assets.
- Depreciation Limitations have been changed on automobiles and personal use property.
- Treatment of certain farm property has changed.
What You Can Deduct
- Payments to charities and the government. If the payments are business-related and the company receives state or local tax credits in exchange, they are deductible as business expenses.
- Qualified bicycle commuting reimbursements. In addition, you now must include these reimbursements in the employee’s wages.
- Awards that are tangible personal property. The IRS does not consider the following to be tangible personal property: cash, cash equivalents, gift cards, gift coupons, specific gift certificates, tickets to recreational events, vacations, meals, lodging, stocks, bonds, securities, and other items of a similar nature.
- Paid family/medical leave. For this leave to be eligible, it must be available to all full-time employees and be pro-rated for part-time employees. The pay must equal at least 50 percent of the employee’s normal wages, and the employee must be using the leave to assist a parent, child, or spouse; all other relatives void the eligibility for deduction. View all of the guidelines for these deductions here.
What You Can’t Deduct
- Extravagant meals for entertainment purposes. Companies are still able to deduct 50 percent of meals used for business purposes as long as an employee is in attendance and the food is not extravagant. Companies are no longer able to deduct entertainment and recreation-related expenses.
- Fines for illegal activities. Any fine ordered or agreed upon with the government or one of their entities is not eligible for deduction. The few exceptions to this include reparations paid to come into compliance with a violation of the law, serve as restitution to correct damage the violation caused, restitution as ordered by a settlement agreement or court order, or restitution for previous failure to pay deductible taxes. View these exceptions here.
- Fringe benefits for transportation. With the exception of the bicycle incentive, any transportation expenses given as a benefit to employees are not deductible under the new tax reforms. The exception to this rule is if the transportation stipend is necessary for employee safety.
Consult with your tax professional and irs.gov for details of the rules and how they may affect your business depending on your specific circumstances and tax situation. Additional information regarding tax reform for businesses can be found here.
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