NEW YORK, April 19, 2023 (Newswire.com) - Credello: Small businesses face many challenges in today's economy, and tax changes can have a big impact on their bottom line. Here are five key tax changes to know for 2023.
Bonus depreciation ends
Many small business owners relied on using depreciation to help mitigate necessary equipment costs. But in 2023, the option for bonus depreciation - claiming 100% the year the equipment was purchased - is being phased out. For the next tax year, bonus depreciation will only be 80% and will continue dropping by 20% every year until it's gone.
This means it's crucial to invest in your business now while bonus depreciation is still available. Many small business owners, especially self-employed individuals, shy away from making big upgrades as they worry they can't afford it or aren't sure whether to get a business-only credit card because they're confused about whether business credit cards affect your credit. It's in your best interest to utilize what's available to you now before it becomes more difficult to get government help via tax deductions that can be put toward growing your business.
The FFCRA and ERC are available for many more businesses
Previously the Families First Coronavirus Response Act (FFCRA) and Employee Retention Credit (ERC) were tax credits available to larger businesses to combat the economic damage COVID-19 caused. Now, thanks to changes in the CARES Act, the Biden Administration has opened up new avenues for self-employed individuals, freelancers, gig workers, and small businesses to receive federal COVID relief in the form of tax credits for their 2020 and 2021 taxes.
The IRS will receive more funding
The IRS will soon add 4,000 more phone support and 700 in-person support staffers for the 2023 tax season. While this may slightly increase your chance of getting audited, what's more important is that you'll soon see faster changes to your tax processing, including faster refunds and getting tax liens from credit reports removed sooner.
New tax credits for employee retirement plans
The 2023 tax year will see a new tax credit available for businesses with up to 50 employees, which covers 100% of the cost (up to $5,000) of starting a retirement plan. In addition, employers can claim a credit for any employer contributions to each employee's plan up to $1,000.
New credits for green business initiatives
The Inflation Reduction Act includes an expansion of the Energy-Efficient Commercial Buildings Deduction, which allows business owners to claim a tax credit for each square foot of renovation done for qualified eco-friendly upgrades. In addition, there's also now a tax credit of up to $7,500 for electric or fuel cell electric vehicles used for business purposes. If your business does a lot of freight shipping and needs its own dedicated haulers, the tax credit goes up to $40,000.
The bottom line
These are just a few key changes that will affect small businesses in the 2023 tax year. Talk to your CPA to determine how you can qualify for these new opportunities and ensure your business gets all the help it's eligible for from the government.
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Original Source: Credello: Small Business Tax Changes to Know for 2023