The December 2017 federal income tax law changed certain business tax items beginning with 2018 filings. Do you know which of the following statements are from the new law?
Deduction for meals and entertainment
A business can deduct up to 50% of entertainment expenses directly related to the active conduct of a trade or business or incurred immediately before or after a substantial and bona fide business discussion.
A business can deduct 50% of the cost of business meals if the taxpayer or an employee of the taxpayer is present and the food or beverages are not considered lavish or extravagant.
Like-kind exchange treatment applies to certain exchanges of real, personal or intangible property.
Like-kind exchange treatment applies only to certain exchanges of real property.
Section 179 depreciation deduction
A taxpayer can expense the cost of qualified assets and deduct a maximum of $500,000, with a phaseout threshold of $2 million.
A taxpayer can expense the cost of qualified assets and deduct a maximum of $1 million, with a phaseout threshold of $2.5 million.
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✓ Right answer!
The new law generally eliminated the deduction for expenses related to activities considered entertainment, amusement or recreation.
However, taxpayers can continue to deduct 50% of the cost of business meals if the taxpayer (or an employee of the taxpayer) is present and the food or beverages are not considered lavish or extravagant.
The meals may be provided to a current or potential business customer, client, consultant or similar business contact. If provided during or at an entertainment activity, the food and beverages must be purchased separately from the entertainment, or the cost of the food or beverages must be stated separately from the cost of the entertainment on one or more bills, invoices, or receipts.
✓ Right answer!
The new law increased the maximum deduction to $1 million and increased the phase-out threshold to $2.5 million.
The law also modifies the definition of section 179 property to include certain improvements made to nonresidential real property.