The Bottom Line: How the Tax Cuts and Jobs Act Impacts Your Business

By: Victoria B. Finlinson

With tax season upon us, many Americans are being forced to learn what the Tax Cuts and Jobs Act (the “Act”) (deemed the most consequential tax reform in a generation) really entails and its impact on a business’ bottom line. While the changes in income tax brackets has been most heavily covered in the media, many employers are surprised to learn that a number of provisions in the Act may also affect a company’s employment practices. Below is a summary of the effects of the Act that most directly impact employers:

Deduction/Credit

Pre-Tax Cuts and Jobs Act

Post-Tax Cuts and Jobs Act

Family and Medical Leave Credit

  • None.
  • 12.5% credit for wages paid to employees on leave. Wages paid must be 50% or greater than regular pay rate.
  • 12.5% credit increases by .25% for each percentage point that the wage rate exceeds 50%. Amounts to a max credit of 25%.
  • All qualifying full time employees have to be given at least two weeks of leave.
  • For 2018 & 2019, a written policy is required.

Meals & Entertainment Expenses

  • 50% limit for meals and expenses.
  • 100% of meals provided to employees for the convenience of the employer and in-house employer cafeteria meals.
  • 50% still allowed for business meals.
  • Entertainment is now non-deductible.
  • Company-wide events are still fully deductible.
  • 50% limit for meals provided to employees for the convenience of the employer and in-house employer cafeteria meals.
  • In 2026, meals provided for employer’s convenience will be non-deductible.

Sexual Harassment Costs Subject to Nondisclosure Agreements

  • Deductible business expense.
  • No deduction is allowed if subject to a non-disclosure clause.
  • Applies to attorneys’ fees in addition to any settlement or payout amount.

Qualified Bicycle Commuting Exclusion

  • Bicycle commuting reimbursements excluded from employee wages.
  • Exclusion suspended, so now included in employee wages.

Exclusion for Moving/Relocation Expense Reimbursements and Moving/Relocation Expense Deduction

  • Qualified moving expenses reimbursed by employer can be excluded from employee wages.
  • Qualified moving expenses deducted for Adjusted Gross Income.
  • Suspended with an exception for active duty military.
  • Suspended with an exception for active duty military.

 

For assistance navigating how the Act may affect you and your company, contact the Labor & Employment Group at Clyde Snow & Sessions at 801.322.2516 or vbf@clydesnow.com.

This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal, and accounting advisors before engaging in any transaction. Nothing in this communication is intended or written by us to be used, and cannot be used, for the purpose of (i) avoiding penalties that may be imposed by any governmental taxing authority or agency, or (ii) promoting, marketing, or recommending to another party any matters addressed herein.