July 26, 2018
One really nice one that that took a 50-percent hit was the "supper money" deduction. What is that? It's the fringe benefit that lets you provide your employees (and yourself!) with tax-free meal money when you're working late.
Before tax reform, you deducted 100 percent of the supper money cost. After tax reform, your tax deduction for supper money is subject to a 50 percent cut for amounts paid after 2017 and before 2026.
And this gets worse. For supper money costs incurred after January 1, 2026, your supper money tax deduction is zero.
For now, let’s look at your deductions for tax years 2018 through 2025 and how you make the supper money rules work for your employees and you. Yes, you!
As a business owner, you’re an employee eligible for supper money.
That's right. If you know how to follow the four rules that govern the super-money deduction, you can write off half of the cost of dinner.
Four rules you need to know now:
Rule #1: Make sure your dinners are "occasional."
Rule #2: Keep the cost of meals "reasonable." Uncle Sam doesn't specify a dollar limit on spending, but don't splurge when it isn't appropriate.
Rule #3: Be sure you're working overtime before you dig in. The IRS requires that the meal allowance must enable your employees to work overtime. (You can come out a winner too!)
Rule #4: Don't calculate the cost of the meal based on the number of hours your employees work. For example, you can't give a $20 allowance per hour of overtime. Instead, provide a reasonable discretionary meal allowance.
It's a sad fact . . .
The Tax Cuts and Job Act took a big bite out of a bunch of valuable business-meal and entertainment deductions...
Determining and supporting deductions is complex for those not well-versed in federal and state rules and regulations, not to mention differentiating between the two. As it does ever year, the Minnesota Society of CPAs recently surveyed its CPA members about the most outrageous tax deductions clients tried to claim on their tax returns.
Fringe benefits are usually a good thing—but there’s a catch when you own more than 2 percent of an S corporation. The good news? Federal tax law allows the cost of these fringes as deductible expenses for your S corporation.