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Business Tax Changes for 2023

Adjustments in business tax laws and regulations are made each year which makes it hard for just anyone to keep up, having a tax professional help you sort out your filing can exponentially reduce your stress and get you great results. But what are the changes we are facing in 2023?

There are some business tax items that are changing in 2023. This is just a reminder of how this change will affect business owners moving forward.

Amortizing Research and Development Expenses

One of the changes and this is a huge change, is the need to amortize research and development expenses for over 5 years locally, or 15 years if it was done overseas. Previously it used to be that if you had research and development expenses, you can take them all in the year that you have the expense and potentially qualify for the research and development credit.

In 2023, the rules changed. If you have expenses related to research and development those get amortized and evenly distributed over 5 years for local research and development and 15 years if it was done internationally.

100% Meal Deductions

Another update in 2023 is that meals are no longer 100% deductible. These were deductible in 2021 and 2022, this was in order to help restaurant businesses out but moving forward, these are no longer 100% deductible.

Bonus Depreciation

For businesses with assets or real estate investors, this is a big change. Previously bonus depreciation was 100% and this was for prior years up to the end of 2020. Any property or any equipment that you put in that qualifies that was under 20 years that had a 20-year life or less, you can get a bonus depreciation write-off for that item or thing in the current year.

In 2023, that will drop from 100% to 80% and by 2024, this will even go lower to 60% as it slowly phases out and no longer becomes a benefit for business owners. This is really effective for real estate investors that are doing cost segregation.

Standard Mileage Rate

The standard mileage rate has been increased. If you’re driving and you do a lot of it for your business it is better to take the mileage deduction and actual expenses. Your tax return related to vehicles that mileage deduction is going up to 65.5 cents per mile. For medical travel, it is at 22 cents per mile. For traveling due to charity reasons, the rate is 14 cents per mile.

Changes for the 1099K

At the end of 2020, the IRS decided to spin the reporting of the 1099Ks. For instance, PayPal, Square, Zell, Venmo, and other similar platforms were the only ones you had to worry about receiving 1099K if you had either over 200 transactions or made $20,000 or more.

This will not take full effect until later in the year as they may have some confusion on the 1099K reporting side of things. If you are paying vendors using PayPal, Square, Zell, Venmo, and others you don’t want to issue them 1099-NEC, and then on top of that get a 1099K. We have to be mindful of how we’re paying these individuals moving forward.

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