With just a few months left of the US tax year, it is important to start prepare for the upcoming tax year in order to save against tax. Last December new legislation was passed that will affect nearly every business and self-employed worker in the US. Below is a list of just some of the changes to the US tax legislation that you must consider as a US business owner.
Qualified Business Income Deduction
Under section 199A, owners of Sole Proprietorships, partnerships, trusts and S corporations will be able to deduct 20% of their qualifies income for the most part. This mean that qualified businesses will be able to claim the business deduction for tax years following December 31st.
100% expensing for certain business assets
Businesses are now able to write off depreciable business assets in the year the business places them in service. This means that taxpayers are able to elect to expense the cost of any section 179 property and deduct it on their tax return. Under the new law the maximum deduction amount was raised to $1million.
Entertainment and meals: The new law eliminates the deduction for expenses related to entertainment, amusement or recreation. However, taxpayers can continue to deduct 50 percent of the cost of business meals if the taxpayer or an employee of the taxpayer is present and other conditions are met. The meals may be provided to a current or potential business customer, client, consultant or similar business contact.
Qualified transportation: The new law disallows deductions for expenses associated with transportation fringe benefits or expenses incurred providing transportation for commuting. There’s an exception when the transportation expenses are necessary for employee safety.
Bicycle commuting reimbursements: Employers can deduct qualified bicycle commuting reimbursements as a business expense for 2018 through 2025. The new tax law also suspends the exclusion of qualified bicycle commuting reimbursements from an employee’s income for 2018 through 2025. Employers must now include these reimbursements in the employee’s wages.
Qualified moving expenses reimbursements: Reimbursements an employer pays to an employee in 2018 for qualified moving expenses are subject to federal income tax. Reimbursements incurred in a prior year are not subject to federal income or employment taxes; nor are payments from an employer to a moving company in 2018 for qualified moving services provided to an employee prior to 2018.
Employee achievement award: Special rules allow an employee to exclude certain achievement awards from their wages if the awards are tangible personal property. An employer also may deduct awards that are tangible personal property, subject to certain deduction limits. The new law clarifies that tangible personal property doesn’t include cash, cash equivalents, gift cards, gift coupons, certain gift certificates, tickets to theater or sporting events, vacations, meals, lodging, stocks, bonds, securities and other similar items.