Much of the media’s attention regarding the new tax reform bill has focused on the reduced corporate tax rates, the 20% pass-through entity deduction, and the limitation on state and local taxes. However, there were several less-talked-about, yet impactful, changes to the tax law that businesses and individuals should be aware of.
- Business entertainment expenses, which were 50% deductible under the old law, are no longer deductible. However, meals expense remains 50% deductible. Therefore, it would be wise for businesses to create separate accounts to track meals and entertainment expenses if not already doing so. Another change included in the bill related to meals expenses limits the deduction for meals provided for the convenience of the employer (ie – meals provided to keep employees in the office). Previously, this expense was 100% deductible to the employer, but is now limited to a 50% deduction.
- The penalty for not having health insurance remains intact until the end of 2018.
Section 529 savings plans can now be used to pay for up to $10,000 per year in K-12 tuition expenses. Previously, Section 529 plans could only be used to pay for higher education expenses.
Unreimbursed business expenses that employees could previously deduct to the extent miscellaneous itemized deductions exceeded the 2% floor are no longer deductible, which may lead to some businesses experiencing push back from employees to reimburse these expenses.