As the year comes to a close, there are still a few weeks to maximize your tax-saving strategies. Here are some reminders and options as you plan your year-end and look forward to 2023.
Business Meals
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.
Bonus Depreciation
Bonus depreciation starts scaling down beginning in 2023. The Tax Cuts and Jobs Act increased first-year bonus depreciation to 100%. The deduction phases out over the next four years, dropping to 80% in 2023, 60% in 2024, 40% in 2025, and 20% in 2026. There is still time to take advantage of the 100% threshold before year-end.
Charitable contribution planning
Individuals
If you are planning to donate to a charity, it’s likely better to make your contribution before the end of the year to potentially save on taxes. There are many tax planning strategies we can discuss with you about charitable giving. For example, consider donating appreciated assets that have been held for more than one year rather than cash. Opening and funding a donor-advised fund (DAF) is appealing to many as it allows for a tax-deductible gift in the current year and the ability to dole out those funds to charities over multiple years. Qualified charitable distributions (QCDs) are another option for certain older taxpayers who don’t typically itemize on their tax returns.
Corporations
For the tax year 2022, the maximum allowable contribution deduction is limited to 10% of a corporation’s taxable income (as compared to the temporary increase of 25% that was in effect last year).
