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A Tax Accountant in Northern California Explains How Recent Tax Reforms Affect Employee Expense Deductions

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The recent Republican-led changes to the tax code have resulted in a lot of changes that businesses and their employees need to know about – and some of these changes are perhaps not getting as much attention as they should.  That’s why, as a tax accountant in northern California with decades of experience, Montgomery Taylor and Company is looking at specific issues in the 2017 tax bill, and how they can affect you.

Today’s topic covers the matter of employee expense deductions – or rather, the new lack thereof.  The 2017 tax bill is not good for employees accustomed to deducting work-related experiences and may significantly impact your bottom line.

Understanding How Changes to Employee Expense Deductions Affect You

Previously, W-2 wage-earning employees of a business could deduct work-related business expenses, as long as those expenses exceeded 2% of their adjusted gross income.  Now, itemized deduction is gone, at least during the years from 2018 through 2025.

We wish there was more to it, but that’s the new law as it stands.

This is undoubtedly going to impact a lot of wage earners significantly.  Many professions, such as educators, truck drivers, mechanics, computer technicians, and a lot more, all involve employees paying for some of their own expenses and getting reimbursed later.  Without these itemized deductions, their costs will go up with no legal entitlement for repayment of the expenses.

Are there any alternatives for employees who will be hit hard by this change?  None that are within the law. 

Our best advice to clients being hit by this is that they talk to their employers and attempt to negotiate reimbursement through their workplace.  However, there is no legal requirement for employers to do this, and undoubtedly many will want to resist seeing their own expenses go up.  Other provisions in the tax law will be hitting business owners’ own bottom line, such as removing the deduction for business-related entertainment expenses, making them less likely to agree to extra costs.

If there is any mitigating factor here, it is only that the standard deduction has gone up somewhat – so in some circumstances, a worker might not have qualified for additional deductions anyway.

Meet with A Tax Accountant in Northern California Who Can Help Preserve Your Wealth

If the new tax laws are impacting you unfavorably, we can offer solid advice and planning.  Contact Montgomery Taylor, CPA, today.