2018 brought changes to the entertainment deduction rules. We want to ensure that you’re not scrambling to meet these new standards. Before you find yourself stuck financially, let’s review these new rules for 2018.
You know the drill: You’re out to dinner with a client or co-worker discussing work and you file away your receipt to pass on to your accountant for a tax deduction. 50% of these business-related meals — as long as they’re truly business-related meals — are still deductible, as well as transportation to and from restaurants for work-related meals. But the new law states that these meals can no longer take place at nightclubs, cocktail lounges, country clubs, sporting events, or on fishing trips. So keep your clubs secure and your fishing rods stowed if you want those deductions in 2018.
What about the meals employers provide to their employees during an employee’s shift? What about coffee, water, and snack services? These used to be 100% deductible, but as of January 1, 2018, they’re only 50% deductible. (And after 2025, you won’t be able to write them off at all.)
Tips for Best Practice: On your receipt, write the business topic discussed and the individuals who were present at the meal. It’s important to do this because in the event of an audit, the auditor may disqualify any meal expenses that aren’t properly documented.
Event tickets and club memberships are great gifts to your favorite clients, or perks for your employees. Half of these expenses used to be eligible for a write-off, but with the new laws in place this is no longer possible. And yes, this even applies to tickets to qualified charitable events. So say goodbye to the skybox unless you can spring for it without the deduction perk.
Tips for Best Practice: We realize that club memberships are often a great way to socialize on behalf of your business. Under the new rules, it may be more financially beneficial to become a sponsor for an event instead. Often, these types of sponsorship expenses can be written off as advertising. If this is something you’d like to consider, let’s talk about the options available to you.
There are many employee perks that can also benefit your taxes. We’re only covering parking and incentive payouts here, but if you’re looking for additional options, give us a call.
In 2017, employers were allowed to write off all the parking permits and transit passes they handed out to employees. The new law states that employees can exclude the perk from their income, but companies can no longer write off the expense.
2018 brought changes to employee incentive payouts as well. In 2017, each award was deductible if it was under $400 cash and an employee was awarded no more than $1,600 per year. Awards can still be granted, but you can no longer award with cash or gift cards. 2018 laws say these items must be tangible personal property instead.
Tips for Best Practice: If you’re a company paying for employee parking downtown, you need to be aware of all that is involved so both you and your employees are coming out ahead. Contact us and we’ll help you evaluate these costs.
As a reminder, document, document, document. 2018’s entertainment deduction rules on documentation haven’t changed. The rules still require you to document the date of any client meal, who was present, and what business was discussed. If you can’t substantiate your deductions, you won’t be allowed the tax deduction.
Company parties are still 100% tax deductible. (Summer picnics, too!) So while your employees might not get there on a tax-deductible transit pass, your end-of-the-year party can still benefit your tax situation. In fact, it may be the last chance of the year to wedge in as many write-offs as possible.
For most people, long-term tax planning is something they know they need to get to, but it’s not a monthly or even annual habit. And we’ve found that most of the time it’s simply because people just don’t know how. Sound familiar? You want to get a tax plan in place but don’t understand all the options and don’t know how to figure out what would be best for your specific situation. All this likely leaves you stuck. That’s where we come in. We know the plans and programs available, and the ways tax reform is shifting your options. Additionally, we know how to ask the right questions to put you in the driver’s seat when it comes to long-term tax planning.
If you have kids, you probably lie in bed at night and think of all the things they’re going to need as they grow up. If you’re a planner, you might think about their college fund and how you’re going to grow it. The cost of education has only increased in recent years. In fact, College Board reports the trends in their 2017 report, where they highlight that college costs went up 3% in just the past year. (Not to mention the astronomical increase in tuition costs since the late 80s, especially at private colleges and universities.) As such, you’re probably searching (along with most parents) the best way to finance your children’s educations. We’re here to help with some simple tax options that you may not know about.
A 529 Plan, a tax-advantaged savings plan, is legally known as a “qualified tuition plan.” What’s that mean? Basically, it’s a savings plan that is tax-deferred. If the money is used for qualified higher education expenses, the money can be used tax-free. Additionally, any capital gains from your investment are tax-free as well. The best thing about these savings plans is that because of tax reforms, now up to $10,000 can be used toward K-12 tuitions. (When using these funds for college education, money can be used not only for tuition, but also room and board, technology items, and books and supplies.) No matter what state 529 Plan you invest in (each state is slightly different and Savingforcollege.com lists the top 10), you can use the funds for any qualified college nationwide. That’s over 6,000 colleges and universities, and even covers more than 400 international colleges and universities. But know that as an Oregon resident, you may get tax benefits when investing in an Oregon 529 Plan. (The same could be true if you’re a resident of another state and open a 529 Plan with that state.) Call us, and we’ll walk you through the 529 Plan that’s best for you, your taxes, and your kids.
Once you have your kids’ education plans situated and you’re confident that your right-now and near-future tax benefits are taken care of, it’s time to strategize long-term taxes and think about retirement. The goal in retirement is to keep your taxable income as low as possible. Keep in mind that many of the tax deferments during working years can come back with higher tax rates during retirement. There are things you can do before you’re 54 to qualify your withdrawals and reduce taxes later. Call us and we’ll talk about what these tax benefits might look like for you.
Charitable contributions are a great way to generate tax deductions. Many don’t realize that you can really optimize your tax benefits if you apply a little strategy to your giving. Last year, tax reform changed tax brackets and tax deductions, so you might not realize that shifting some little things can make a huge difference. Think about this: you give a few thousand dollars every year to your favorite charity. Kudos! But what if you’re hitting the standard deduction? You’re missing out on some advantages, and it might behoove you to donate a larger amount every other year instead. We thrive on strategic tax planning — call us and we’ll answer your tax questions.
Some of the most important tax advice we can give is to look for ways to diversify your retirement income. From Roth accounts to social security, savings accounts to bonds, pensions to rentals, we can strategize ways to keep your income diverse. This is vital, especially if you find yourself in a higher tax bracket.
If you want to explore some long-term tax planning, odds are that we can help strategize a better tax solution for you. Call us — we’re all for tax planning that benefits your financial future.