The Tax Cuts and Jobs Act included a number of tax law changes that affect small businesses, such as deductions for fringe benefits, which can affect both a business’s bottom line and its employees’ deductions. Here’s a summary of what these are:
Transportation fringe benefits. The new law disallows deductions for expenses associated with qualified transportation fringe benefits or expenses incurred providing transportation for commuting, except as necessary for employee safety.
Bicycle commuting reimbursements. Under the new tax law, employers can deduct qualified bicycle commuting reimbursements as a business expense for 2018 through 2025. The new tax law suspends the exclusion of qualified bicycle commuting reimbursements from an employee’s income for 2018 through 2025. Employers must now include these reimbursements in the employee’s wages.
Moving expenses. Employers must now include moving expense reimbursements in employees’ wages. The new tax law suspends the former exclusion for qualified moving expense reimbursements. There is one exception for active duty members of the U.S. Armed Forces. They can still exclude moving expenses from their income. There is additional guidance on reimbursements for employees who moved in 2022 but were reimbursed for expenses in 2023. Generally, reimbursements in this situation are not taxed.
Achievement awards. Special rules allow an employee to exclude achievement awards from wages if the awards are tangible personal property. An employer may also deduct tangible personal property awards, subject to certain deduction limits. The new law clarifies the definition of tangible personal property.
Please call us if you have any questions about tax law changes affecting fringe benefits and your small business.