By now you’re probably well aware of the new federal tax law that came into effect this month.
As of today, those who earn more than $1 million per year will be able to claim an $80,000 tax deduction for their employer-provided travel expenses.
For those who make less than $20,000 per year, the amount of the deduction is capped at $3,000.
For the average taxpayer, the maximum deduction for personal use of a travel device is $10,000, with the exception of an employer-sponsored trip.
But what if you’re in a different income bracket and are traveling more than 50 percent of your income for work?
According to the new law, that $10K limit will now be $200 per person per year instead of $400 per person for a family of four.
That’s a big change, as it means that for the average family of two with an income of $100,000 or less, they’re now going to have to make up an additional $1,000 in tax for each $1 they spend on travel.
That’s a significant hit for the typical taxpayer who is trying to maximize their travel income.
In fact, many employers will be required to give a refund of $300 for the first $2,000 spent on their employees, which will only be available for a single employee.
This is the first tax law change to affect Americans, but the changes have also prompted a few interesting questions.
What does the new $80K deduction mean for a person who earns $100K?
Will it affect a family making $100k?
Will the $100 kitty apply to a family who makes $150k?
Or, will the $80k rule apply only to an employer that’s paying its workers $100 per hour, but they’re still earning $100 an hour?
This new tax break is likely to be of some interest to many Americans, as the majority of the changes to the tax code come in the form of a one-time tax rebate.
A one-year tax break can help pay for higher education and retirement expenses, for example.
But while the $200 one-off payment is likely a nice thing to have, many will likely see it as an incentive to spend more time traveling, as long as they have the opportunity to do so.
That said, it’s worth noting that some of the larger businesses are exempt from the $1K limit, including travel agencies, hotels, and restaurants.
For that reason, a one dollar change in tax rules could potentially lead to a $1k increase in taxable income for an employer.
This story was updated to include the correct tax credit amount.