Here are some general small-business tax changes and tips that could be relevant for the 2023 tax year:
Qualified Business Income (QBI) Deduction: The QBI deduction is a deduction for pass-through entities, such as sole proprietorships, partnerships, and S-corporations. The deduction is equal to 20% of the business’s qualified business income, subject to certain limitations.
Simplified Home Office Deduction: If you operate a home-based business, you may be able to deduct home office expenses on your tax return. The simplified home office deduction allows you to deduct $5 per square foot of your home that is used for business purposes, up to a maximum of 300 square feet.
Changes to Meal and Entertainment Deductions: The Tax Cuts and Jobs Act (TCJA) of 2017 eliminated most entertainment expense deductions. However, business meals are still deductible, subject to certain limitations. In 2023, the IRS is expected to release guidance on how to apply these limitations.
Changes to Depreciation Rules: The TCJA also made significant changes to the depreciation rules for businesses. One of the changes was to increase the Section 179 expensing limit to $1,050,000 in 2022 and to index it for inflation in future years. Additionally, bonus depreciation has been extended through 2026.
Changes to Retirement Plan Limits: The contribution limits for retirement plans, such as 401(k) plans, are subject to periodic adjustments based on inflation. In 2023, the contribution limit for 401(k) plans is expected to increase from $19,500 to $20,000.
Keep Accurate Records: Accurate record-keeping is essential for small businesses to claim all the deductions and credits they are entitled to. You should keep detailed records of all your business income and expenses, including receipts, invoices, and bank statements.
Consider Hiring a Tax Professional: Small-business owners should consider hiring a tax professional to help them navigate the complex tax rules and regulations. A tax professional can help ensure that you are taking advantage of all the deductions and credits available to you, and can help you avoid costly mistakes that could result in penalties and interest.
It’s important to note that tax laws and regulations can change frequently, so it’s always a good idea to consult with a tax professional or the IRS for the most up-to-date information.