When it comes to alterations involving employee benefits tax breaks, the Tax Cuts and Jobs Act (TCJA) has left people with some negative and positive feelings. Both the benefit-providing businesses and the benefit-enjoying employees are affected by this act. This could prove to be a headache for employees and payroll departments alike. Let’s take a closer look.
We’ll start with some tax breaks that have now been curtailed. In the following areas, tax breaks have been eliminated or reduced by the TCJA beginning with the 2018 tax year.
Awards for Achievements
The employee tax exclusion and the corresponding business tax deduction are now both eliminated as far as achievements awards are concerned. These awards would be provided in the form of securities, tickets to theater events and sporting events, lodging, meals, vacations, certificates or gift coupons, and cash (and other items that are similar). However, if a gift certificate lets the recipient pick actual property from a select choice of employer-preselected items, tax breaks are still available. The exclusion/deduction limit goes up to $400 of the value of awards for achievement (for safety or service length); or $1600 for achievement awards defined in a written achievement plan that is nondiscriminatory.
Reimbursement For Moving Expenses
The good news for businesses is that they will most often still be allowed to deduct moving expense reimbursements. The bad news for the employees is that, through the year 2025, this act takes an employee’s qualified moving expenses and makes them no longer excluded as taxable income. The reimbursement to the employee for moving expenses will now be taxable for the employee.
Meals Taken On-Premise
If an employee is served in a company cafeteria or has to work late and thereby has meals provided on-premise, businesses can only deduct 50% of their costs (to provide these meals) with this new act. In 2025, any deduction at all is scheduled to be eliminated. Good news for the employees however – this benefit’s value will still be tax-free.
Benefits Involving Transportation
If a business provides fringe benefits involving transportation for their employees (van pooling, mass transit passes, parking allowances), that is no longer a deduction for the business. Also included in this is an employee having to hire a car service – that is not a deduction anymore either (unless an employee’s safety depends on it). A bicycle commuting $20 a month benefit is also no longer tax-free.
But Wait, There Is Actually One New Tax Break!
For the next two years (through 2019) a tax credit was actually created by this act. The wages paid to employees on medical and family leave are now a tax credit for the business. There are numerous qualifications that apply, of course.
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