Calculator and Stethoscope

2018 Business Expense Deduction Check-Up

As we enter the final quarter of 2018, it’s a good time to consult with your CPA and also brush up on changes to the business expense deductions from the Tax Cuts and Jobs Act (TCJA). We also recommend using this time to review and recategorize business expenses to align with the TCJA changes, which may help save on tax preparation costs.

Here are a few notable TCJA tax deduction changes that have impacted our small business clients:

  • Business Expense

  • Entertainment for Clients*
    (tickets to events, including charitable events, golf outings, event transportation/parking)
  • Office Snacks, Coffee, Water
  • Transportation Fringe Benefits
    (employee transit/parking fees)
  • Business Vehicle Maximum First-Year Depreciation Allowance
  • Meals Provided
    for Convenience of Employer
  • 2017

  • 50%
  • 100%
  • 100%
  • $10,000
  • 50% or 100%
  • 2018

  • 0%
  • 50%
  • 0%
  • $18,000
  • 0%
*Client business meals are still 50% deductible if business is conducted with the tax payer present, and the meal is not lavish or extravagant. Travel to and from business-related meals is also deductible at 100%. Entertainment-related meals with clients are not deductible if they are social outings where no business is conducted.

Business Expense Deductions That Have Not Changed

  • Office-wide parties and picnics: 100% deductible
  • In-office meals during business meetings of employees, stockholders, agents, and directors: 50% deductible
  • Meals during business-related travel: 50% deductible
  • Free food offered during a public event: 100% deductible

TAX TIP: How to categorize business expenses in QuickBooks®

Taking extra time to properly code expenses in your Profit & Loss Statement in QuickBooks will help streamline the tax return preparation.

With the new tax rules, you will want to review your expense accounts and rename accordingly. For example, break out meals for entertainment, travel, and office refreshments. Anything that is true entertainment (as outlined above), should be reclassified to non-deductible expenses. Also modify the account name “meals and entertainment expense” on the chart of accounts to “business meals,” separate from office meals or refreshments. It’s also a good idea to keep a separate “travel meals” sub-account under “travel expenses.”

Business Travel Expense Deductions

Standard mileage rates for 2018 are $0.54 for every mile of business travel driven (a 1 cent increase from 2017). The rate per mile driven in service of charitable organizations remains at $0.14.

Per diem rates for business travel meals and lodging also change yearly. The GSA Per Diem Rate Table is usually updated on October 1. Note: If you reimburse an employee for per diem expenses in excess of the allowable GSA rate, it counts as taxable income to the employee. Also, be aware of the high reimbursement areas of the country, Aspen is one example, in which the per diem rate is higher than the standard rates of other cities in Colorado, there are similar cities in which this rule applies across the country.

While mileage and per diem rates continually change, one factor still holds true when it comes to business travel expenses – document everything and save those receipts. Apps like Expensify and ReceiptBank make it easy to scan, save, organize, and document business receipts.

In terms of business travel expenses and considerations there, this article by The Balance Small Business sums it up well. Their article on how to deduct business travel expenses is also helpful.

“Trust, But Verify”

ASAP is not a CPA and does not hold ourselves out to be tax experts. It is wise to consult with your CPA directly on all the changes that will impact your 2018 tax returns as well as changes slated for 2019.