Tax Reform Changes Fringe Benefit Deductions


Tax Reform Changes to Fringe Benefit Deduction Affect Business’s Bottom Line

The Tax Cuts and Jobs Act includes tax law changes that affect businesses and the 2018 tax returns they file this year. One change is to fringe benefit deductions, which can affect both a business’s bottom line and its employees’ deductions. Here is a rundown of these changes:

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

Employers can now 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, meaning they now must be included 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. However, active duty members of the U.S. Armed Forces can still exclude moving expenses from their income. There is additional guidance on reimbursements for employees’ 2017 moves if an employer reimburses the expenses in 2018. 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 also may deduct awards that are tangible personal property, subject to certain deduction limits. The new law clarifies the definition of tangible personal property.

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