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Fringe Benefits Changes for 2018


The December 22 Tax Cuts and Jobs Act contained major tax changes and reform affecting both businesses and individuals.

The following is a summary of the major fringe benefits changes. For Berntson Porter’s White Paper on the full impact of the new tax legislation, click here.

Meals and Entertainment Deductions, Moving Expenses, and Transportation Benefits:

The Tax Cuts and Jobs Act contains major changes to the deductibility of meals and entertainment expenses, moving expenses, and qualified transportation fringe benefits, all effective January 1st, 2018. This may change current payroll tax reporting for employers.

Entertainment:
The Act generally disallows any deduction for entertainment, amusement, or recreation activities, or any facility used in connection with such activities, even if the expense is directly business related. Under previous law, these expenses were 50% deductible if they were directly business related. There is also no deduction allowed for membership dues with respect to any club organized for business, pleasure, recreation, or other social purposes.

Meals:
While the deduction for entertainment expenses has been repealed, the 50% deduction for food and beverage expenses associated with operating a trade or business is retained. This includes business meals that are not in an entertainment setting, as well as meals consumed by an employee while traveling for work.

Additionally, certain meals expenses which were previously 100% deductible, are now only 50% deductible, and will become nondeductible beginning on January 1st, 2026. These expenses include the following:

• Meals provided at an eating facility that meets the requirements for an on-premises dining facility
• Meals provided to employees on an employer’s business premises for the convenience of the employer

Qualified Moving Expense Reimbursements:
Moving expense reimbursements provided by an employer to their employee for a qualified move are no longer excludible from the employee’s wages. The employer can deduct these reimbursements, but these amounts must be included in the employee’s W-2 wages as taxable income.

Qualified Transportation Benefits:
The Act disallows employers a deduction for providing qualified transportation fringe benefits to their employees, such as qualified parking, transit passes, and vanpools, unless the benefit is necessary for ensuring the safety of the employee. These benefits are still tax-exempt to the employees. There is an exception for qualified bicycle commuting reimbursements, which are now deductible by the employer and must be included in the employee’s income.

The above changes apply to amounts paid or incurred after December 31, 2017 and are scheduled to sunset in 2026.
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Your team at Berntson Porter looks forward to working with our clients on this historic change to our tax system. If you have any questions, please contact your tax professional at Berntson Porter & Company, PLLC at 425-454-7990.