2023 is going to be a bit different than the last few years. There are two changes business owners should be aware of when it comes to allowable deductions for 2023.
- First-year bonus depreciation is no longer 100% of the cost of the purchased asset. It is now 80% with the remaining 20% being expensed over the remaining life of the asset. There are no changes to Section 179 deductions, so you may still be able to fully expense assets purchased.
- Business meals at restaurants are no longer fully deductible. 2023 is the return to being 50% deductible.
While deductions reduce taxable income tax credits reduce taxes dollar for dollar. Three credits to be aware of for 2023 are…
- Retirement Plan Start Up Cost Tax Credit: for businesses with fewer than 50 employees, allows a credit of up to $5,000 for the first three years of the plan to cover administration costs. In addition, there is an auto enrollment credit of $500 per year for three years if an eligible employer adds auto enrollment for their employees to the retirement plan. Existing plans are eligible for this additional credit.
- Electric vehicles placed in service April 18, 2023 and after must meet the critical mineral and battery component requirements to get the full $7,500 credit. If only one of the requirements are met the credit is only $3,750. Electric vehicles placed is service by April 17, 2023, were eligible for a credit of up to $7,500 if they only met the assembly requirement and MSRP limit. There is also a new income limit for all EVs placed in service this year.
- EV Charger Tax Credit: Businesses that install new EV chargers or EV charger equipment can get a credit of up to 30% of the cost of the equipment and installation up to $100,000 per station.
Knowing the tax law changes for a given year helps you plan the right purchases and saves money. Call our office to schedule a tax planning appointment.
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