Key Business Tax Planning Highlights
When analyzing your financial statements, look at where your business is positioned with income and expenses to close out the tax year.
This may mean getting caught up on your bookkeeping to have a better picture of where your tax situation stands.
Deferral of Income & Accelerating Expenses
Many times, there may be strategies such as deferral or acceleration of income or prepayment or deferral of expenses, that can help you save taxes and thereby strengthen your financial position.
For example, in terms of property and equipment purchases, you may benefit from making these purchases before the end of the year. Many purchases can be completely written off by businesses in the year they are placed in service. Plus, there are tax-favorable rules that permit qualified improvement property to qualify for 15-year depreciation and, therefore, also be eligible for 80% first-year bonus depreciation.
The percentage for first-year bonus depreciation is set to decrease to 60% for 2024 unless Congress passes legislation. Thus, it’s important to consider the timing of your capital purchases.
Energy Tax Incentives
There are many tax incentives to encourage businesses to decrease their carbon footprint and become more environmentally sustainable.
When certain criteria are met, businesses may be able to claim tax credits for items such as:
- Electricity produced from certain renewable sources (including geothermal, solar and wind facilities)
- Energy efficient home improvements (only available to eligible contractors and manufactured home manufacturers)
- Alternate fuels
In addition, businesses may be eligible for a tax deduction based on the energy savings generated for qualifying energy efficient commercial building property.
The rules are complex, and careful research and planning now can be beneficial.
As you enter the holiday season and have more social gatherings with your customers and employees, keep in mind the rules for business meal deductions. The 100% deduction for restaurant meals is not available for 2023, but there are circumstances where certain business meals may qualify for a 100% deduction. It is important to properly categorize your expenses.
Net Operating Losses (NOLs)
If your deductions for the year are more than your income for the year, you may have an NOL. In general, you can use an NOL by deducting it from your income in other year(s), but it is limited to 80% of your taxable business income in any one year. We can advise you on any potential tax benefits and limits.
Beneficial Ownership Interest (BOI) Reporting
The Corporate Transparency Act (CTA) requires the disclosure of the beneficial ownership information of certain entities to the Financial Crimes Enforcement Network (FinCEN) starting in 2024. This is not a tax filing requirement, but an online report to be completed if applicable to FinCEN. There are severe penalties for businesses who willingly do not comply with the requirements.