Later in the year, we will talk about tax planning items for 2023, but today I just wanted to give you a heads up on some changes that will be occurring in 2023 if there is not any law changes in Washington as well as review the changes that affected 2022. I think you have the list.
THE FIRST ONE IS MEALS AND ENTERTAINMENT?
Prior to the pandemic, any expenses for business meals were only 50% deductible and any costs for entertainment were not deductible. Then the pandemic happened and restaurants were greatly affected. So there was a law change for 2021 and 2022 only which allowed businesses to deduct 100% of meals expense. Effective January 1, 2023, the meals deduction goes back to 50%. There has been no changes made to the entertainment expenses which are not deductible.
Bonus depreciation has come and gone over the years. Bonus depreciation allows a business to immediately write off certain assets in the first year, rather than over their normal schedule of 3, 5, 7 or even 15 years. As of 2022, the bonus depreciation is 100% and can be used on both new or used assets purchased during the year. Well beginning in 2023, bonus begins to phase-out. For 2023, the bonus depreciation is 80% and then continues to decrease by 20% each year after until it is gone in 2027.
FOR FAMILIES, THE CHILD TAX CREDIT ENHANCEMENT.
As a result of the pandemic tax law changes, the child tax credit was increased from $2,000 per child to either $3,000 or $3,600 in 2021. Part of this credit was actually paid out in monthly installments. Beginning in 2022, the old rules once again apply. These rules have lowered the credit back to $2,000 with none of it paid in installments. It also brought back the lower phase-out limits, so not everyone is eligible.
DEPENDENT CARE OR DAYCARE CREDIT?
The expanded credit of $4,000 to $8,000 in 2021 is back once again to its pre-pandemic level of $3,000 to $6,000 of expenses (maximum credit $2,100) in 2022.
THEN THERE SOME MISCELLANEOUS CREDITS AND DEDUCTIONS ALSO, CORRECT?
Yes in 2022 there were changes that decreased the earned income credit and eliminated the special charitable deduction for those who do not itemize.
SO NOW WHAT?
Now we wait. With the 2022 election and the year-end tax extender bills that also come out, we will see what the actual 2023 tax laws will look like.
Be sure to talk to one of our professionals if you have any questions regarding tax changes for 2022 and 2023.