Navigating 2023’s Evolving Tax Laws as a Small Business

Published by Matt Brady | April 3, 2023

tax law changes that your small business cpa can help with

Running a small business takes an incredible amount of time, creativity, and expertise in your field. With so much on your plate, one of the last things you want to worry about as a CEO is regularly having to catch up on small business tax law changes.

The good news is that you don’t have to – because this is where the small business CPAs of BradyRenner shine.

Navigating the current economic climate with the help of a reliable CPA and advisory firm can save you time and money, and free you up to focus your efforts where they are needed most. We are available to help you adjust and navigate economic challenges and upcoming tax law adjustments in order to minimize the negative impact on your business and maximize your tax deductions.

There are several changes to small business tax laws in 2023, and BradyRenner is ready to help.

Changes to the R&D Tax Break

In previous tax years, a research and development tax break allowed companies to deduct their R&D spending from payroll taxes all in the year the expenditure occurred. Research is expensive and doesn’t always yield a significant return on investment, so the R&D tax break was created to incentivize small business owners to invest in innovation – which is good for individual businesses as well as for the greater economy.

According to the IRS, small businesses that qualify for the R&D break are those whose gross receipts are under $5 million for the year, and who don’t have more than five years of gross receipts total. Your small business can claim tax credits for research expenses regardless of whether or not you are currently generating revenue.

However, instead of being allowed to claim the entire cost in one tax year, businesses are now required to deduct their U.S.-based research expenses over a period of five years. This change will require some adjustments to your budget, and BradyRenner’s trusted CPAs can help you plan for these changes.

2017 “Bonus Depreciation” Benefit Will Sunset

In 2017, the federal tax bonus depreciation benefit allowed businesses to claim 100% of the price of business investments, which allowed businesses to deduct the total cost of certain equipment the year it was purchased, instead of over time. However, this benefit was intended as a short-term incentive for businesses, and beginning in 2023, only 80% of bonus depreciation may be claimed, dropping an additional 20% each year through 2026. Starting in 2027, no bonus depreciation benefit will exist.

Because of the phasing out of this bonus, now may be a good time for your small business to invest in new equipment while an 80% bonus depreciation benefit exists. By revising your purchase timeline by a year or two, your small business could see significant tax savings. The experienced small business CPAs of BradyRenner can help you make decisions about purchasing new equipment in order to take advantage of the benefit before it reduces by 20% in the next year.

What About the Section 179 Deduction?

Although the bonus depreciation benefit is sunsetting, the section 179 deduction, which all companies that lease, finance, or purchase business equipment valued at less than $2 million qualify for, is still applicable. BradyRenner can help you determine whether or not your small business can qualify for this deduction. And in 2023, the maximum deduction under section 179 increased from $1,080,000 to $1,160,000. Additionally, the phase-out threshold increased from 2022’s limit of $2,700,000 to $2,890,000.

The section 179 deduction and the bonus depreciation deduction can both be utilized in many situations. BradyRenner can advise you on the specifics of your small business deductions and whether or not claiming both deductions would be appropriate.

BradyRenner CPAs: Experts in Navigating Tax Laws for Small Businesses

BradyRenner’s team of CPAs has decades of experience navigating small business tax law changes as part of a full suite of financial management and advisory services. We take the time to learn the ever-evolving tax laws so that you can focus on the success of your small business. BradyRenner can help you continue to create growth opportunities and ROI while minimizing your tax burdens. We are experts in this field so that you don’t have to be, and we are here to help you adjust and thrive through 2023’s tax law changes.

The small business CPAs at BradyRenner know how daunting changing tax laws can be, so call us today and we’ll work together to ease your burden and keep you focused on your business. And check back soon for our next installment in this series, which will teach you how to showcase your unique value proposition as a small business.

Sources:
The Newest Tax Law Sunset Changes
U.S. Businesses Face Higher Federal Tax Bills In 2023 Coupled With State Tax Relief
Tax Changes in 2023: What Individuals and Businesses Can Expect
Congress isn’t extending 4 popular tax breaks in omnibus bill passage