The Tax Cuts and Jobs Act was the largest tax reform legislation in over three decades. With a number of changes to the tax code, it’s critical that individual taxpayers and business owners understand what can still be written off, and the best practices to do so.
From charitable donations to business meals and commuter costs -- there is still time to lower your 2019 tax bill with the following write-offs.
Charitable contributions are one of the few remaining deductions since Trump’s tax overhaul. But how can you best take advantage of tax breaks for charitable giving?
Donor-advised funds (DAF) are one of the best ways to give to charities. A donor-advised fund, a charitable giving vehicle, is administered by a public charity to help manage donations on behalf of organizations, families or individuals.
Donor-advised funds allow donors to make a charitable contribution, receive an immediate tax deduction and then recommend grants from the fund over time.
Contributions to donor-advised funds also have the chance to grow tax-free. This means that the return on charitable contributions is directly applied to the charity you choose.
Qualified charitable distribution
Another way to help a charity you care about while saving money on taxes is a Qualified Charitable Distribution. This is a direct transfer of funds from one’s IRA custodian to a charity.
In other words, your required minimum distribution (RMD) is directly given to a charity. If your required minimum distribution is $150,000, you can give $100,000 of your RMD per year to charity.
Take your clients to dinner, but maybe skip the show
In addition to charitable donations, business meals are frequently forgotten about as potential write-offs.
Business meals are still limited to a 50 percent deduction, so if you take a client out to dinner, you are able to deduct 50 percent of the food and drink costs. However, entertainment costs are no longer deductible. So understand that if you take a client out to dinner and a show, the show would be disallowed as a deduction.
Employer-provided meals are 50 percent deductible if they’re provided on the premises of the employer and are offered for the convenience of the employer.
For restaurant employers, employee shift meals are still 100 percent deductible, as long as they meet certain rules and are furnished at an employer-operated eating facility.
Commuting costs -- yes and no
Another common question about tax write-offs is whether commuting costs are covered.
Costs associated with commuting to and from work are not a tax-deductible item for business owners. However, employers may allow employees to use up to $265 per month in pre-tax income to pay for transit vouchers, commuter highway vehicle fares and/or parking fees.
Paul Miller is the founder of Miller & Company LLP, a New York City-based CPA firm. Miller & Company LLP is a full-service accounting, tax planning, tax preparation and business advisory firm.