​Demystified Blog Archive #50 – Create Permanent Tax Savings #3

Recently, stocks around the world have been pummeled.

Global markets have shed nearly $7 trillion in value since late September.

There wasn’t any one thing that sent stocks plunging. Investors are just getting nervous. 

And with good reason.

Interest rates are rising, midterm elections have brought about unforeseen change, we’re on the verge of a trade war with China, the world is drowning in debt.

The S&P 500 is nearly 10% below its September peak.

The Nasdaq has officially entered correction territory, down 12% from its record.

But this selloff could just be the beginning.

Stocks, bonds, and real estate are all still highly overpriced.

We’re in the midst of the longest bull market in history, it will likely take more than a quick selloff to erase the excesses of the past decade.

That’s why I’ve been getting defensive. To be honest, I don’t know where the market goes from here, nobody does.

But I know we’re getting late in this cycle.

The old adage goes that history never repeats itself, but it does rhyme. And every economic boom in history has been followed by a bust.

I personally feel that this next correction will be worst than ever before.

This is why it is important to create permanent tax savings.

Remember, every tax dollar saved is cash directly back into our pocket, bank account, etc. that can be re-directed, re-invested, etc.

Business related meals are a good way to create permanent tax savings, however, 2018 Tax Cuts and Jobs Act has brought about a few changes regarding these tax laws.

When dining with a prospective or existing client, taxpayers may continue to deduct 50 percent of the cost of business meals if the taxpayer (or an employee of the taxpayer) is present and the food or beverages are not considered lavish or extravagant. The meals may be provided to a current or potential business customer, client, consultant or similar business contact.

Food and beverages that are provided during entertainment events will not be considered entertainment if purchased separately from the event.

Meals while traveling outside of a normal commute in your business were deductible by 50% and that continues to be the case. More specifically, these are expenses while traveling for legitimate business meetings. Examples would include education or training conferences, or a Board of Directors retreat, checking on a rental property, a business location, or even going to meet a prospect or vendor. This includes food, tip, and even the bar tab.

Meals with employees, club meetings, and food for employees used to be 100% deductible, however, they are now limited to 50% which include:

• Meals to hold a required lunch meeting on the business premises with your employees not with your business partners or clients.
• Meals to hold a required business meeting with your employees at an offsite location that passes the definition of a business premise.
• Food in the office for employees and your convenience.
• Meetings that include a lunch fee, for example at the Chamber of Commerce or a local REIA club.

Year-end parties for employees, marketing presentations, and COGS food expenses continue to be 100% deductible. These are items where food is paid for in a non-entertainment venue for the general public in a marketing presentation or open house. Moreover, you can deduct the food and costs for a team building event, or a year-end party exclusively for employees and not the owners of the business, or highly compensated employees.

• Snacks or food at a promotional event for customers or prospects.
• Food costs as a restaurant, store or similar establishment where the food is a ‘cost of goods sold’ as an item for sale
• Food at an event or workshop in which patrons paid to attend and the food was part of the cost to attend.

The combinations of examples and possibilities are endless.

Of course, there is always additional information you should consider when setting up any type of business, finance, or taxation strategy plan. And, you should always be working with a team of professionals to help mitigate the risk of any investment.

To your investment freedom