Though there has been a lot of political attention to tax law changes, inflation and environmental sustainability, political compromise has led to smaller impacts on taxes this year. However, with the passage of the Inflation Reduction Act and CHIPS Act this year, there are new incentives for you to consider. There are also several tax provisions that have expired or will soon. We continue to closely monitor any potential extensions or changes in tax legislation and will update you accordingly.
We’re here to help explain tax and financial planning opportunities. Please contact us at your earliest convenience to discuss your situation so we can develop a customized plan. In the meantime, here’s a look at some issues impacting small businesses to consider as we approach year-end.
Analysis of Your Financial Statements
Let’s 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. We can help you analyze your financial statements for tax savings and planning opportunities.
Deferral of Income and 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 100% first-year bonus depreciation.
Certain write-off benefits are set to decrease after the end of the year unless Congress extends them. Thus, it’s very important to consider the timing of your capital purchases. Let us help you receive the best tax treatment.
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. There is a 100% deduction (rather than the prior 50%) for expenses paid for food or beverages provided by a restaurant. This provision expires at the end of 2022.
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.
Additional Tax and Financial Planning Considerations
Year-End Planning Equals Fewer Surprises
Whether it’s working toward a tax-optimized business succession plan or getting answers to your tax and financial planning questions, we’re here for you. Please contact our office today to set up your year-end review. As always, planning ahead can help you minimize your tax bill and position you for greater success.
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