The best way to handle the 2023 tax code is to be proactive. This means keeping up with the latest changes and planning your taxes accordingly.
There are a few changes those who are self-employed or own businesses need to be aware of: One is the complex anti-abuse rules that limit the availability of the 20% deduction for pass-through income. This means that if you have business income from a partnership or S corporation, you’ll need to speak with a professional at Fricke & Associates to make sure you understand the complexities of these rules.
The other change is the increased deduction for qualified business income. For tax years beginning in 2023, they will increase the deduction from 20% to 25%.
One of the most significant changes in the 2023 tax code is the elimination of personal exemptions. This means you can no longer deduct a certain amount for each family member. Instead, you’ll only be able to deduct a certain amount for each dependent child under the age of 18.
Another change is the standard deduction. For single filers, it will increase from $12,000 to $15,000. For married couples filing jointly, it will increase from $24,000 to $30,000.
You can get ahead of the game and ensure that you and/or your business are ready for whatever comes its way in 2023 by following these rules:
1. Review your business’s structure.
The new tax code is going to favor businesses that are organized as pass-through entities, such as sole proprietorships, partnerships, and S corporations. If your business is currently structured as a C corporation, you may want to consider changing to a pass-through entity. This will help you take advantage of the lower tax rates that are available for pass-through entities.
2. Make sure you’re taking advantage of all the deductions and credits that are available to you. There are a number of deductions and credits that small businesses can take advantage of, and the new tax code is only going to make more of them available. Make sure you’re taking full advantage of everything that’s available to you so that you can lower your taxable income and save money come tax time.
3. Keep good records.
This one seems like a no-brainer, but it’s more important than ever to keep meticulous records of your income and expenses. With the new tax code, there are going to be more opportunities for audits, so it’s crucial that you have all your ducks in a row. Invest in quality accounting software or hire Fricke & Associates to help you keep track of everything—it’ll be worth it in the long run.
We recommend planning now to ensure you’re prepared for your 2023 taxes. Talk with Fricke & Associates about what you need to do to comply with the new rules. They can help you make the necessary changes to your business so that you’re ready for 2023.