As the year comes to a close, it is time to start thinking about tax season again. Several important changes have been made for tax year 2023.
Fixed asset depreciation is a significant tax benefit, and one that is often discussed when it comes to tax planning. Changes have been made to the amounts allowed for depreciation for tax year 2023. Section 179 depreciation limits raised from $1,080,000 in 2022 to $1,160,000, with a phase out when assets placed in service exceed $2,890,000. Bonus depreciation has also begun its phase out and is capped at 80% of the fixed asset purchase price in 2023.
Another hot topic for tax year 2023 is the pass-through entity tax. Many states have reacted to the $10,000 individual tax return deduction limitation on state and local taxes (enacted in the Tax Cuts and Jobs Act of 2017) by allowing pass through entities to elect to pay tax at the entity level and receive a credit for their ownership percentage share at the individual level. This can be very beneficial depending on your individual tax situation and what state you reside in. Below is a chart showing some of the participating states pass-through entity (PTE) rates versus the individual income tax rate. If you have questions on this, please reach out to your tax professional for situation specific advice.
There is also a new law on the issuance of form 1099-K for 2024. If an individual received payment in excess of $5,000 during the year, they may receive a 1099-K reporting that income to the IRS. Many common apps like Venmo and Zelle will now be issuing this form for payments sent/received throughout the year. The same goes for any “gig economy” work such as Uber or any other on demand work. Ask your tax professional for more information if you are concerned you may receive a 1099-K.
A few other changes to note:
- The 2023 standard mileage rate is $0.655 per mile driven.
- The standard deduction for 2023 has increased to $13,850 for single, $20,800 for head of household and $27,700 for married filing joint.
- The deduction for meals has reduced back down to 50% for 2023.
- For those who turned 73 this year you must take your required minimum distribution by 4/1/2024.
- 401(k) contribution limit is $22,500 for 2023 and $23,000 for 2024.
Tax Brackets 2023
If you require tax preparation or consulting services, please reach out to Equipment Dealer Consulting, LLC. Our team of experienced Certified Public Accountants provide tax and other accounting services to equipment dealerships all over the U.S. We look forward to helping you and your business!
Article Written by Amy Brandt, CPA at Equipment Dealer Consulting
Amy Brandt joined the EDC team in November of 2022 as a certified public accountant to assist in the growing tax preparation demands. She has over six years of experience in tax preparation. Before joining the EDC team, Amy was a partner of a firm for three years that focused on tax preparation for businesses, individuals, trusts and non-profits. Her experience is in a variety of industries from real estate and construction to retail and restaurants. She also has experience in tax planning with various client industries. Amy graduated from the University of Phoenix with her Master of Science in Accountancy in 2018 and obtained her CPA in 2020.
