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Wednesday, August 15, 2018

Tax Reform Impact Meals & Entertainment Deduction

Tax Reform Impact Meals & Entertainment Deduction

The Tax Cuts and Jobs Act made changes to meals and entertainment expenses that businesses are allowed to deduct.  Going forward from January 1, 2018, businesses are no longer able to deduct most business entertainment expenses including; tickets to sporting events and theater, private boxes for sporting events, golf dues and golf outing for clients.  Meals with clients are still 50% deductible if business owner is present, business is conducted and the expense is not lavish or extravagant.  If the taxpayer is not present, or no business is conducted, then there is no deduction available. Overtime employee meals, meals provided for employer convenience are now only 50% deductible, as long as they are excluded from the employee’s income as a de minimis fringe benefit.
Do you provide coffee, water or snacks for your employees while at work?  Those expenses are also now only 50% deductible.

Honorine M. Campisi, CPA

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Tuesday, July 31, 2018

Tips for Renting Your Vacation Home This Summer

Tips for Renting Your Vacation Home This Summer

One of the ways to defray the costs of owning and maintaining a vacation home, is to rent it out when you are not using it.  Income earned from those rentals may be reportable on your income tax return. For income tax purposes, a vacation home may include a house, apartment, condo, mobile home, boat, or similar property.  In order to be considered a “home”, the vacation property must have basic living accommodations, such as sleeping space, a toilet, and cooking facilities.  Read on for some helpful tips.

  1. Income and expenses related to renting a vacation home are reported on Schedule E of your personal income tax return.
  2. As long as you (or your family) also use the home, your rental expenses cannot exceed the rent you receive (meaning you cannot claim a loss.)
  3. Special rules must be followed when you rent out a home that you also use personally.  Expenses must be allocated based on the number of days the unit is rented or available for rent, and the number of days it is used by you and your family.  Any expenses that cannot be deducted on Schedule E, may be deducted on Schedule A.
  4. If you you rent a vacation home for less than 15 days a year, you are not required to report the rental income on your tax return.  In this case, any mortgage interest or real estate taxes for the home would be deducted on Schedule A.
If you are currently renting, consider owning your own vacation home!  See https://www.oceanfronthhi.com/stop-renting-and-buy-home/ for some reasons why!

By: Honorine M. Campisi, Senior Tax Manager

Wednesday, July 18, 2018

Tax Reform Impact on Itemized Deductions

The Tax Cuts and Jobs Act made changes to expenses that taxpayers are allowed to deduct if they itemize.  Among these changes are: a reduction on the mortgage balance for which interest may be deducted, reduction of state and local taxes deduction, elimination of miscellaneous expense deductions, casualty losses (except in the case of federal disaster declarations).

The mortgage interest deduction has been changed for mortgages taken out after December 15, 2017.  Any new mortgage after that date must be $750,000 or under for the interest to be fully deductible.  New mortgages that exceed $750,000, will be only partially deductible.  The previous limit was $1 million.

Beginning with 2018, the state and local tax deduction is limited to $10,000.  The $10,000 limit is applied to the combination of income taxes and real estate taxes.  So, if you pay $12,000/ year in real estate taxes and pay $6,000 of state income tax, instead of taking the total deduction of $18,000 – you will be limited to $10,000.

Also beginning with 2018, the miscellaneous expense deduction is gone.  In the past, miscellaneous expenses that exceeded 2% of your adjusted gross income were deductible.  This included expenses such as: unreimbursed employee expenses, union dues, job search expenses, tax preparation fees, investment advisory fees and safe deposit box rental fees.

Finally, casualty losses are no longer deductible unless they are a result of an event that is declared a federal disaster.  That means your flooded basement, fire damaged home, and theft losses are no longer deductible.

Honorine M. Campisi, CPA