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2023 Tax Changes- A Comprehensive Guide for Business Owners

Now that 2023 has come to a close, small business owners are gearing up for the upcoming tax season. Understanding the latest tax changes is crucial for optimizing financial strategies and avoiding penalties.

This comprehensive guide simplifies the complexities of end-of-year tax planning forbusinesses in 2023, helping entrepreneurs confidently navigate the evolving tax landscape.

1.   The Importance of Tax Planning:

Tax planning is an integral component of effective financial management for any business. It involves understanding the tax implications of your decisions and finding ways to minimize your tax liability. Proper planning saves money and steers clear of potential tax pitfalls.

2.   Expanding Section 179 Deductions:

Section 179 deductions empower businesses to deduct qualifying equipment and property costs. In 2023, the Section 179 deduction limit is anticipated to increase, giving business owners more opportunities to write off capital expenditures. This presents a strategic advantage, especially for those considering new equipment or technology investments.

However, it's crucial to note that the Section 179 deduction limit is expected to decrease from 100% to 80% in 2023, gradually decreasing by 20% each year until 2027.

3.   Enhanced Research and Development Credits:

For businesses involved in research and development activities, 2023 brings enhanced R&D tax credits, fostering innovation by offering additional opportunities to offset tax liability. Maximizing these credits requires a thorough understanding of eligibility criteria and documentation requirements.

The Research and Development Tax Credit, established in 1981, encourages innovation across businesses, including startups. It can offset federal and state taxes and applies to activities beyond traditional lab work. Examples include developing new products, processes, and technologies and testing, validating, and improving existing products and processes.

4.   Employee Retention Credit:

The Employee Retention Credit, initially designed to support employers retaining employees during the COVID-19 pandemic, has changed. In 2021, the credit increased to 70% of $10,000 in qualifying wages for each full-time employee, amounting to almost $21,000 credit for each employee.

However, past Covid-19, the ERC is no longer applicable. Small business owners can file their taxes for 2023 by April 15, 2024. The 100% depreciation deduction in Section 179 expired in 2022, meaning the maximum limit for deduction for qualified businesses will be 80%, which will decrease by 20% every year till January 2027.


Local and state governments offer hundreds of tax credits, such as

1.  The Alternative Motor Vehicle Credit

2.  New Markets Credit

3.  Empowerment Zone Employment Credit

4.  Plug-In Electric Drive Vehicle Credit

5.  Credit for Increasing Research Activities

6.  Health Coverage Tax Credit

7.  Retirement Plans, Startup Costs, Tax Credits, and more.[DM3] 

5.  Employee Benefit Plan Adjustments:

Business owners must review changes in employee benefit plans, including retirement contributions and health savings accounts. Staying compliant with new contribution limits and understanding adjustments to employer-sponsored plans benefits the business and its employees.

Wrapping Up

Business owners must stay informed for the 2023 tax season and adapt their financial strategies to the evolving tax landscape. This comprehensive guide highlights key tax changes, offering insights to help you make informed decisions for your business. Stay proactive, engage with tax professionals, and ensure your tax planning aligns with your business goals.

If you're a small to midsize business making thousands or multiple thousands in revenue, navigating 2023 tax changes is critical. Especailly for businesses making over $100,000 in reveneue it's critical you understand the tax changes.

Join our waitlist to secure your spot for a TCM financial coaching consultation to financial plan for your business and get access to capital.


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