Sec. 179 expensing provides small businesses tax savings on 2017 returns — and more savings in the future

If you purchased qualifying property by December 31, 2017, you may be able to take advantage of Section 179 expensing on your 2017 tax return. You’ll also want to keep this tax break in mind in your property purchase planning, because the Tax Cuts and Jobs Act (TCJA), signed into law this past December, significantly enhances it beginning in 2018.

2017 Sec. 179 benefits

Sec. 179 expensing allows eligible taxpayers to deduct the entire cost of qualifying new or used depreciable property and most software in Year 1, subject to various limitations. For tax years that began in 2017, the maximum Sec. 179 deduction is $510,000. The maximum deduction is phased out dollar for dollar to the extent the cost of eligible property placed in service during the tax year exceeds the phaseout threshold of $2.03 million.

Qualified real property improvement costs are also eligible for Sec. 179 expensing. This real estate break applies to:

  • Certain improvements to interiors of leased nonresidential buildings,
  • Certain restaurant buildings or improvements to such buildings, and
  • Certain improvements to the interiors of retail buildings.

Deductions claimed for qualified real property costs count against the overall maximum for Sec. 179 expensing.

Permanent enhancements

The TCJA permanently enhances Sec. 179 expensing. Under the new law, for qualifying property placed in service in tax years beginning in 2018, the maximum Sec. 179 deduction is increased to $1 million, and the phaseout threshold is increased to $2.5 million. For later tax years, these amounts will be indexed for inflation. For purposes of determining eligibility for these higher limits, property is treated as acquired on the date on which a written binding contract for the acquisition is signed.

The new law also expands the definition of eligible property to include certain depreciable tangible personal property used predominantly to furnish lodging. The definition of qualified real property eligible for Sec. 179 expensing is also expanded to include the following improvements to nonresidential real property: roofs, HVAC equipment, fire protection and alarm systems, and security systems.

Save now and save later

Many rules apply, so please contact us to learn if you qualify for this break on your 2017 return. We’d also be happy to discuss your future purchasing plans so you can reap the maximum benefits from enhanced Sec. 179 expensing and other tax law changes under the TCJA.

© 2018

Meals, entertainment and transportation may cost businesses more under the TCJA

Along with tax rate reductions and a new deduction for pass-through qualified business income, the new tax law brings the reduction or elimination of tax deductions for certain business expenses. Two expense areas where the Tax Cuts and Jobs Act (TCJA) changes the rules — and not to businesses’ benefit — are meals/entertainment and transportation. In effect, the reduced tax benefits will mean these expenses are more costly to a business’s bottom line.

Meals and entertainment

Prior to the TCJA, taxpayers generally could deduct 50% of expenses for business-related meals and entertainment. Meals provided to an employee for the convenience of the employer on the employer’s business premises were 100% deductible by the employer and tax-free to the recipient employee.

Under the new law, for amounts paid or incurred after December 31, 2017, deductions for business-related entertainment expenses are disallowed.

Meal expenses incurred while traveling on business are still 50% deductible, but the 50% limit now also applies to meals provided via an on-premises cafeteria or otherwise on the employer’s premises for the convenience of the employer. After 2025, the cost of meals provided through an on-premises cafeteria or otherwise on the employer’s premises will no longer be deductible.


The TCJA disallows employer deductions for the cost of providing commuting transportation to an employee (such as hiring a car service), unless the transportation is necessary for the employee’s safety.

The new law also eliminates employer deductions for the cost of providing qualified employee transportation fringe benefits. Examples include parking allowances, mass transit passes and van pooling. These benefits are, however, still tax-free to recipient employees.

Transportation expenses for employee work-related travel away from home are still deductible (and tax-free to the employee), as long as they otherwise qualify for such tax treatment. (Note that, for 2018 through 2025, employees can’t deduct unreimbursed employee business expenses, such as travel expenses, as a miscellaneous itemized deduction.)

Assessing the impact

The TCJA’s changes to deductions for meals, entertainment and transportation expenses may affect your business’s budget. Depending on how much you typically spend on such expenses, you may want to consider changing some of your policies and/or benefits offerings in these areas. We’d be pleased to help you assess the impact on your business.

© 2018

Accounting Services: Should I consider this service for my business?

by Liana Ellison, CPA

Accounting Services Manager at Atchley & Associates, LLP


Atchley & Associates, LLP provides accounting services of various levels to many of our clients. The levels of services vary from consulting with startup companies about their accounting set up all the way to outsourcing their accounting department to us. We are able to provide a custom level of service to meet our client’s needs. Some of the accounting services we provide at Atchley & Associates include:

  • Outsourced payroll, set up, reporting, support and consulting
  • Outsourced bookkeeping, reconciliations of accounts such as bank, credit cards, loans and lines of credit, and preparation of any adjusting journal entries
  • Review of systems utilized and internal processes, and make recommendations of accounting platforms and ancillary applications
  • Customized Financial Statement preparation
  • Preparation or support for various compliance such as personal property renditions, Forms 1099, and Sales Tax
  • Year-end accounting analysis and clean-up in preparation for tax return

In addition, our team can take the pressure off business owners or executive directors that may not have the expertise or time to review and supervise the work performed by their accounting department.  These leaders may not want to deal with having to worry about turnover or fraud in this critical position, and often engage us to support them in this area of their business or organization.

Our services are not specific to any one industry, therefore we are able to support various types of service industries including a number of non-profit clients.

I’ve put together some recent questions that our group has received and compiled them into a True or False Quiz as examples of how we support our client. As in every case, that correct answer is- “it depends”. However, you may find some helpful information for your business or line of work.

  1. A client inquired, I receive a cell phone allowance with my payroll of $50 a month, this taxable compensation to me- true or false?

False- this can be considered non-taxable compensation, as a non-tax fringe benefit IF

– The employer has an accountable plan and

– There is a business connection for the cell phone use and

– The allowance does not exceed the cost of employee’s monthly plan (requires substantiation). Any excess allowance would be considered taxable compensation.

  i. IRS Notice 2011-72

  1. I had the privilege to attend the Rotary scholarship luncheon last month with our partner, Harold Ingersoll, where Rotarians gave out over $43K in scholarships towards recipient’s tuition and higher learning. The Rotary Club of Austin is not required to issue a 1099 to these recipients for the amount received- true or false?

True- the Rotary Club of Austin is not required to issue scholarship recipients a 1099 since these funds were not in connection with any services performed for teaching, research or other services as a condition for receiving the scholarship. It may not prevent the recipient from picking it up as income on their personal return, but nothing is required to be reported to the IRS by the Rotary Club of Austin.

  i. Sec 117(b) and Regulations section 1.6041-3(n), Tax Topic 421

  1. I have an hourly (non-exempt) employee therefore I am only required to pay them at least once a month in the state of Texas- True or False?

False- per Texas Pay Day Law hourly (non-exempt) employees must be paid at least twice a month.

  i. Texas Payday Law section 61.011

  1. I bought a used iPad mini for my business for $199. Since the cost is less than $250, I don’t need to report this property on the Personal Property Rendition for Travis County– true or false?

False- per Travis County Appraisal District, ALL business personal property that is used in business must be rendered on the form, regardless of the amount.

  1. I just started a new business and have chosen QuickBooks Online as the application to provide record keeping for my business because I have heard it’s the best in the market- True or False?

Trick question- You might receive a different answer depending on who you ask. There are several new applications on the market that compare to QuickBooks Online. However, QuickBooks still retains a large portion of the small business market.

  i. Contact us to find out what might be the right fit for your business.

You can leverage our services for more answers to these types of questions in addition to receiving accurate reporting and record keeping.  Contact us for more information on how we can help your business.


Depreciation-related breaks offer 2016 tax savings on business real estate

Commercial buildings and improvements generally are depreciated over 39 years, which essentially means you can deduct a portion of the cost every year over the depreciation period. (Land isn’t depreciable.) But enhanced tax breaks that allow deductions to be taken more quickly are available for certain real estate investments:

1. 50% bonus depreciation. This additional first-year depreciation allowance is available for qualified improvement property. The break expired December 31, 2014, but has been extended through 2019. However, it will drop to 40% for 2018 and 30% for 2019. On the plus side, beginning in 2016, the qualified improvement property doesn’t have to be leased.

2. Section 179 expensing. This election to deduct under Sec. 179 (rather than depreciate over a number of years) qualified leasehold-improvement, restaurant and retail-improvement property expired December 31, 2014, but has been made permanent.

Beginning in 2016, the full Sec. 179 expensing limit of $500,000 can be applied to these investments. (Before 2016, only $250,000 of the expensing election limit, which also is available for tangible personal property and certain other assets, could be applied to leasehold-improvement, restaurant and retail-improvement property.)

The expensing limit is subject to a dollar-for-dollar phaseout if your qualified asset purchases for 2016 exceed $2,010,000. In other words, if, say, your qualified asset purchases for the year are $2,110,000, your expensing limit would be reduced by $100,000 (to $400,000).

Both the expensing limit and the purchase limit are now adjusted annually for inflation.

3. Accelerated depreciation. This break allows a shortened recovery period of 15 years for qualified leasehold-improvement, restaurant and retail-improvement property. It expired December 31, 2014, but has been made permanent.

Although these enhanced depreciation-related breaks may offer substantial savings on your 2016 tax bill, it’s possible they won’t prove beneficial over the long term. Taking these deductions now means forgoing deductions that could otherwise be taken later, over a period of years under normal depreciation schedules. In some situations — such as if in the future your business could be in a higher tax bracket or tax rates go up — the normal depreciation deductions could be more valuable.

For more information on these breaks or advice on whether you should take advantage of them, please contact us.

© 2016

Combining business and vacation travel: What can you deduct?

If you go on a business trip within the United States and tack on some vacation days, you can deduct some of your expenses. But exactly what can you write off?

Transportation expenses

Transportation costs to and from the location of your business activity are 100% deductible as long as the primary reason for the trip is business rather than pleasure. On the other hand, if vacation is the primary reason for your travel, then generally none of your transportation expenses are deductible.

What costs can be included? Travel to and from your departure airport, airfare, baggage fees, tips, cabs, and so forth. Costs for rail travel or driving your personal car are also eligible.

Business days vs. pleasure days

The number of days spent on business vs. pleasure is the key factor in determining if the primary reason for domestic travel is business. Your travel days count as business days, as do weekends and holidays if they fall between days devoted to business, and it would be impractical to return home.

Standby days (days when your physical presence is required) also count as business days, even if you aren’t called upon to work those days. Any other day principally devoted to business activities during normal business hours also counts as a business day, and so are days when you intended to work, but couldn’t due to reasons beyond your control (such as local transportation difficulties).

You should be able to claim business was the primary reason for a domestic trip if business days exceed personal days. Be sure to accumulate proof and keep it with your tax records. For example, if your trip is made to attend client meetings, log everything on your daily planner and copy the pages for your tax file. If you attend a convention or training seminar, keep the program and take notes to show you attended the sessions.

Once at the destination, your out-of-pocket expenses for business days are fully deductible. These expenses include lodging, hotel tips, meals (subject to the 50% disallowance rule), seminar and convention fees, and cab fare. Expenses for personal days are nondeductible.

We can help

Questions? Contact us if you want more information about business travel deductions.

© 2016