With the TCJA laws, your business expenses may be taxed differently than before. However, you can still write off standard business expenses, such as marketing, business equipment, employee costs and financial planning software. Here are five changes you should understand and consider:
- Meals and entertainment: While entertainment expense deductions have mostly been cut to zero, you can still write off 50 percent of client meals, if you stay within specific IRS criteria.
- Depreciation of assets: Small business owners can immediately write off more property expenses under the TCJA. You can deduct 100 percent of the cost of certain business assets in the first year, and the TCJA also increases the deduction ceiling from $500,000 to $1 million.
- Accounting method: Businesses with an average of less than $25 million in profits for the last three years can now use the cash method of accounting, so your taxes can reflect only real profits.
- Transportation costs: The TCJA cuts any tax deductions for commuting costs for you or your employees — with one exception. If you have a program in place for your employees to get reimbursed for expenses so they can commute via bicycle, those costs can be deducted.
- Employer credit for paid family or medical leave: Business owners can now deduct a percentage of wages for qualifying employees for up to 12 weeks per taxable year. There are specific rules for calculating the percentage, which has a maximum of 25 percent, so consult your tax advisor.