The days of taking customers to a sporting event or concert, and enjoying the tax benefits of keeping employees on premises for meals, took a turn with the Tax Cuts and Jobs Act of 2017. Keep in mind these changes do not affect tax filings for 2017; they begin with tax year 2018 – next year’s taxes.
There will be no deduction for entertainment expenses compared to 50 percent for tickets and 100 percent for qualified charitable events in the past (office holiday parties remain unaffected – still 100 percent deductible). On top of that, while employee travel meals remain 50 percent deductible, providing employees meals on premises went from 100 percent deductible and tax-free for employees, to 50 percent deductible, and are scheduled to completely go away after 2025.
This will leave businesses with some big budgeting decisions for 2018. But, before we get into that, let’s explore four ways to show your customers some love, even if you can’t enjoy the same tax benefits from buying them a hot dog at a Braves game or treating them to an evening with the Atlanta Symphony Orchestra.
#1: Gift Giving
Sending customers a gift is always a thoughtful thing to do, but it’s also deductible – to a certain point. You can deduct $25 off business gifts you give each person, and for gifts where your business name is permanently engraved on the item, there is no deductible limit as long as you spend $4 or less per gift and it’s distributed on a regular basis.
If you want to go the extra mile and demonstrate how much you truly value your customers, then it might be a good idea to go beyond the $25 limit – perhaps a $50 or $100 gift card – and eat the difference. This kind gesture may lead to a big reward.
#2: Make a Donation
Some people prefer tangible gifts and others donations. I am in favor of both, but especially love the latter. Making a donation to a charitable organization or nonprofit in someone’s name can impact a larger group of people who are in greater need, as well as establish good faith for your customer in the community. It also comes with deductions; for more information, click here.
#3: Treat Your Employees
As small business owners, we both know that we can’t do it all alone. We must have a great staff that is willing to carry out our message and work hard to meet all our goals and expectations.
In turn, we must show appreciation and gratitude, and ultimately keep them happy working for us. So, treating them to meals now and then should be welcomed!
Even though providing employee meals on-premises went from 100 to 50 percent, that shouldn’t necessarily change things. And, employee travel meals are still 50 percent deductible. So, show them some love and continue to treat them to meals and encourage them to enjoy themselves while they’re around you and at work. A little goes a long way!
#4: Bite the Bullet and Entertain Them
Just because entertainment is no longer deductible doesn’t mean you should stop cold turkey. Going to a ball game or a concert is fun, and also a way to get to know your customers better and build a stronger relationship.
Getting out of that office environment can be a nice change, and being entertained in the process never hurts. So, if it makes sense and might lead to more business, bite the bullet and provide some entertainment on your dime. You may just reap the reward!
Let us Know if we can Help!
You may be thinking how all this will impact you financially. There will be a lot of monetary decisions and strategies to consider with all these tax reform changes. But, don’t worry because Sound Business Services is here to help you every step of the way.
Of course, it’s important to always communicate to us the reason for each expense so that we can assign them properly come tax time. But, there is so much more to discuss. Contact us today to see what you can do for your customers this year, and you’ll be on your way to growing your business and pleasing your customers.