It seems most people are scrambling to understand the total impact on businesses and individuals of the new tax law, which bears the unwieldy name “To provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018,” but which we’ll just call the “2017 Tax Law.” And while some tax experts say we won’t really understand the Tax Law’s economic impact for some time, many of the Tax Law’s provisions will become effective in any tax year beginning on or after January 1, 2018. Thus, it is certainly worthwhile to learn and prepare for those changes that may impact you. As an employer, there are a few specific provisions that will impact business and employee deductions about which you should be aware. Please note, however, that the foregoing information is not intended to be tax advice or instruct any particular employer on these issues, but is intended to alert employers to some of the new provisions about which they may want to consult with their tax advisors. Your specific circumstances will determine whether, and if so, how, these provisions may apply.
- Paid Family Leave Tax Credit: Eligible employers who provide certain employees with at least two weeks of paid family leave at a rate of at least 50% of that employee’s regular wages may be eligible for a federal tax credit. The amount of the tax credit will vary under the circumstances, but are only available for paid leave payments provided to employees who make under $72,000/year.
- Employee Achievement Awards: The amount an employer can deduct as a business expense for the cost of employee achievement awards (g., awards for attendance, length of service, safety) made in the form of personal property increases from $400 to $1,600, if the awards are made under a written plan, and meet other specific requirements.
- Sexual Harassment Settlement Payments: Settlement payments made by employers to resolve claims of sexual harassment or sexual abuse, that are subject to non-disclosure agreements, may not be deductible by the employer as a business expense.
- Business-Related Moving Expenses: An employer’s reimbursement of an employee’s moving expenses may now be considered taxable income to the employee, while unreimbursed moving expenses paid by the employee may not be deductible from their own income.
- Employee Meal Expenses: Under the Tax Law, employers may no longer deduct expenses associated with employee meals (but reimbursements for business-related meal expenses remain excluded from employee income).
- Mass Transportation and Parking Expenses: Previously-existing deductions for employers who provided paid transportation and parking benefits to their employees are eliminated in the new Tax Law. Such benefits remain non-taxable to employees, except that employer reimbursements to employees for commuting by bicycle are now considered taxable income to the employee.
- On-Site Gyms: Employers may no longer deduct the cost of on-site gyms, but employees may continue to exclude the benefit from their taxable income.
Once again, we encourage you to consult with your tax advisor about these changes to determine their impact on your business and employees.