Tax deduction rules change from time to time. At the top of the year is a great time to review what you can and can’t do whether you own a medical or healthcare business or are self-employed.
Entertaining clients at a sporting or social event: NO!
Prior to the 2017 Tax Cuts and Jobs Act (TCJA), business owners could deduct expenses linked with entertaining business clients, i.e. taking a client golfing or to a baseball game. This is no longer possible.
Buying meals for clients: YES!
The upside is businesses can still deduct 50% of the cost of business meals and beverages, as long as the business owner or an employee are present during the meal and the meal is not lavish or extravagant. (No Alinea or Per Se!!). Meals can be purchased for current clients, potential clients, consultants or business contacts. While medical or healthcare practice owners usually don’t wine and dine their patients (I feel that my dentist owes me a few bottles of wine!), a meal with a colleague during a consult meeting seems like an appropriate occasion to take advantage of this deduction.
Company events for employees: YES!
What about company picnics for all the wonderful people working in your practice? Fortunately, we can still deduct company events! In addition, it’s still possible to deduct recreational and social activities as long as the aforementioned are held mainly for the benefit of employees (other than employees considered as “highly compensated” – defined in Section 274(e)(4) of the tax code). Food, beverages and facilities for employees provided within a company’s premises can also be deducted.
Employee trips and retreats to resorts: NO!
Regrettably, these expenses can no longer be deducted.
Gifts and awards to employees: YES, but…
What if you want to award an employee for his or her years of service at your practice? You can, as all gifts and awards to employees are deductible expenses for employers. However, keep in mind that a gift or award might become taxable income to the employee. To make sure your employee’s gift does not come along with tax liability:
- Do not give cash or gift cards/points that can be redeemed for merchandise.
- The value of your gift cannot exceed $1,600 (in total per employee per year).
A watch worth $1,600 or less? Yes!
A Neiman Marcus gift card of the same value? Unfortunately, the recipient would have to pay tax on that.