This content was created by MARK KOHLER. This content was uploaded by MARK KOHLER. This is a YouTube/MSNBC interview titled "New Tax Reform and Your Business | Mark J Kohler | MSNBC Interview" (recorded Feb 21, 2018). The excerpt is a hosted interview/conversation between a show host (labeled Speaker A) and guest MARK KOHLER (CPA, business tax and legal advisor and author). They discuss how recent U.S. tax reform affects small and medium business owners — notably the 20% pass‑through deduction and its limits for personal service businesses, the elimination of entertainment expense deductions, changes to meal and office food deductions (now 50% for many workplace meals), and related S‑corporation and budgeting strategies. The segment is practical/advisory in tone, encouraging viewers to consult their accountants about planning and strategy.
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In case you haven't been paying attention, tax policy has changed. And as someone who is making big decisions about your business, there are some surprises there for you. Some are good and some you may not be as happy about. Mark Kohler is a cpa, a business tax and legal advisor and the author of several books. The latest one is the Business Owner's Guide to Financial Freedom. So good to see you.
Thanks for having me.
All right, you're going to break this down for us.
I'll do my best. It's complex.
It is complex. Okay, let's just get high level. At least the things we should go and talk to our accountants about.
Well, as the biggest deduction that's coming through for business owners and this is a big deal because the media is really focusing on the individual side and business owners, I think, oh, it's just going to follow the bottom. It is what it is. But there's some strategy. Business owners, well, medium to small business owners. The pass through the pass through. 90% of the small to medium business owners are s corporations or LLCs. And the legislation didn't leave Main street alone. This is good. We want something. So we get this 20% pass through deduction. So at the bottom line, you get to deduct 20% of your profit as an expense. So if you made a million dollars, you get a $200,000 deduction.
Yep.
Sounds amazing. You're saving taxes. Yep. Now for the average business that's maybe product or service based or restaurant construction company, you're loving it. Good stuff. But then it takes a turn for the worst because if you're a personal service business, it's limited.
You start space out dentists. What's. What's a personal service?
Yeah, like dentists, doctors, engineers, accountants, actors, actresses, architects. You know what, it's funny you bring that. Architects dodged the bullet. I don't know what it was, but engineers get sucked in. So it's personal service, and it's a broad definition is personal service. It phases out if you're single and starting to make more than 150,000 gone. Married, filing joint make, 300,000 or more gone. And so that deduction we were hoping for, you're missing out.
So that 20% deduction benefits some people. Some people, it's a wash. Yeah. You know, at a certain point. Yeah, at a certain point. Okay, then let's talk about some of the things that have disappeared. So entertainment expenses. Tell me where they were and now where they are.
I know and I feel like Debbie Downer today because it's just so frustrating, this entertainment expense, taking people out. And that's an important part of business. You know, let's talk business over some golf, a spa, a theater show, something like that. Baseball game, no longer a write off at all. Entertainment expense is gone. And some argue it's going to have an effect on the entertainment industry itself. But the cost of business just went up. You know, I'm going to go out and still entertain. I need to schmooze my clients. And now I don't even get a deduction for half of that.
You know, it's interesting, I'm guessing that part of our audience is out there thinking it on their own side. I am kind of schmoozing clients, right? I'm taking them out places and now I'm not going to be able to write that off on the other half. There's probably people out there saying I am a client and I have been schmoozed, right? So I've been taken to these great shows and these sporting events and no one's going to do that for me now.
Yeah, I know. What's Vegas going to do? I mean, this is a big deal. So entertainment expense is gone and so business owners need to anticipate this. Think about the year. What's my budget going to be for this type of stuff? Do I need to rein in some of those corporate accounts, the spending accounts for certain.
And this includes everything. So yes, of course, the sporting events, whatever the shows, but also I'm taking you just for dinner or yes, now
that brings in meals because technically meals were part of this entertainment expense. Now all the accounts across the country are looking for loopholes. We're going to see how this plays out. Because isn't dining really a marketing expense in a lot of ways too? So we'll see. But right now, dining, taking someone out to eat is also no longer a write off. Prospects, clients, employees, going out to dinner, not a write off.
Can't you consider the other ones, marketing expenses as all.
Well, you would think. And that's where we're going to see this play out.
This is where it gets complicated because it's all brand new.
Yeah, the devil's in the details. The code is really, it excludes that expense. Now there's a second piece to this. Meals and food in the office is still a write off. It used to be 100% though, you know, donuts on Friday, the cafeteria, the
kitchen, which a lot of modern companies are trying to do because it's a benefit for their employees to get to Hang out with each other and talk with each other.
Yeah, yeah, it's a good one. Now it's 50%. So that all used to be 100%. Right. If now it's 50.
Got it. So we used to get lunch and now we're going to be getting donuts.
Yeah, you just got to, you'll get half the donut. You know, it's a 50% cut, you know, Got it.
Okay, so these are just simply all things that we need to think about as we are budgeting throughout the year. What are we going to spend for Entertainment, for meals, etc.
Yes. And there's a lot of strategy involved. Not only are you going to look at this entertainment and meals expense and where do I want to fall, but on this pass through. See, historically this S corporation has been a great strategy of dividing your, your W2 wages from your K1 or pass through income. Hey, it just got better because we really want to maximize that pass through income and save on the FICA on the payroll. So S corporations are still as popular as ever. You want to meet with your accountant, look at my strategy for the year. What do I want to see in my pass through and where's this deduction going to fall for me?
All right, you've given us a lot to go to our accountants with and that's what we're here for. We're here for to just, just get the questions that you go into it. All right, well, thank you so much, so much. A lot to digest here. Appreciate you coming in.
