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How the New Tax Law Will Affect Small Business Owners in Florida

The American Tax Cuts and Jobs Act has made quite a few headlines since its passage in December 2017, especially as large corporations gave out bonuses and boosted wages for employees. However, there was not as much coverage on how the Act impacts small business owners across the US. One provision in particular affects the deduction companies have relied on for years to reduce their tax liability: Entertainment deductions. Company stakeholders in Florida frequently offer customers and clients special perks, such as tickets to sporting events, golf outings, meals, cocktail hours, and more. The practice is common as a way of showing appreciation for the business relationship. With the Act becoming effective January 1, 2018, it is critical for business owners to review the implications of this provision with a knowledgeable Florida business litigation lawyer.

Details of the New Tax Law

The Act repealed a section of the Internal Revenue Code (IRC) that had previously allowed business owners to take a deduction for entertainment, amusement, and recreation costs which are directly related to business operations. Club membership dues and facilities used for purposes of entertainment are also considered unallowable deductions.

The only expenses a Florida business owner can deduct are those listed in Section 274(e) of the IRC, including:

  • Food and beverages, and the facility used to serve them, which are furnished by the business owner for employees on premises;
  • Expenses for products or services which are compensation for an employee and considered as wages for tax purposes;
  • Costs incurred under a reimbursement or allowance arrangement;
  • Expenses related to entertainment or social activities which are for the benefit of employees, other than executives;
  • Costs for business meetings of an owner’s employees, stakeholders, agents, and directors;
  • Entertainment expenses, including facilities, which are sold to a customer as a true business transaction; and,
  • Other allowable costs as designated by statute.

Other Implications of the Act

Business owners should also be aware of other key changes in the new tax law, such as:

  • There is no longer a deduction for employee achievement rewards, whether in cash, a cash equivalent, vacations, sporting events tickets, securities, or meals;
  • Florida employers cannot deduct costs related to transportation and parking as benefits for employees; and,
  • The Act suspends the deduction for moving expenses, with the exception of members of the U.S. military.

Note that the Act does provide a temporary tax credit to employers that offer paid family and medical leave programs, so long as they meet certain terms and conditions.

Discuss the New Tax Law and Business Litigation with Our Clearwater Contract Dispute Lawyers Today

This summary of the American Tax Cuts and Jobs Act is a brief summary that touches on some of the key provisions impacting Florida business owners. There are many subtleties and details that require the assistance of one of our experienced, skilled business law attorneys at Clearwater Business Law. For more information on the Act or to schedule a consultation, please call us today at (727) 785-5100. We represent business owners and stakeholders in Clearwater, FL and throughout the region, including Pinellas County and Hillsborough County.