Details Matter Bookkeeping


2023 Deduction Changes

by | Dec 16, 2022 | Compliance

As the end of 2022 continues to fly by, I’m getting updates on some of the changes that will be happening in 2023.  I will keep you updated as I come across new rules, but here are the ones I’ve heard about so far.  We keep up with these rules and make sure that we are categorizing everything correctly, so you get the maximum amount of deductions while also not raising any red flags with the IRS.

Business Meals

For 2021 and 2022, business meals were 100% deductible.  But here’s the caveat, and I’m quoting this directly from the AIPB (American Institute of Professional Bookkeepers) newsletter I get every month:

“For the cost of food and beverages to qualify for 100% deductibility, the business owner or employee of the business must be present when the food or beverages are provided, and the expense cannot be lavish or extravagant.  The food and beverages must be provided by a restaurant—defined as a business that furnishes food or beverages to retail customers for immediate consumption whether on or off the retailer’s premises. Businesses that sell primarily pre-packaged goods not intended for immediate consumption do not qualify— i.e., grocery stores, convenience stores and similar businesses.”

That means those trips to the liquor store are not deductible.  Sorry my dudes, them’s the rules.  

Unfortunately, for 2023, that deduction is dropping back down to 50%, but the same rules apply.

Bonus depreciation

Buy now because the bonus depreciation deduction is going away in 2023.  The Section 179 and “heavy SUV” deductions will still be in place though.  If you have questions about that, ask your CPA, they’re the experts.  Basically anything over $2500 I send to the CPA to see if it need to be depreciated or not.

More 1099-Ks

So, a 1099-K is basically a 1099 you are receiving from a third party network (like Paypal).  Prior to 2022, it used to only be for more than 200 transactions a year totaling over $20,000.  For most businesses that would be like your credit card merchant.  But now a single transaction over $600 can require the third party platform to issue a 1099-K.  So, I’m looking at you single member LLCs and sole props that are receiving payments through Paypal or possibly even Venmo.  On a good note, you won’t have to send a 1099-NEC to any of your contractors that you are paying via cc or Paypal, so I guess that’s a win.

Personal Tax

On the personal side, a bunch of credits are returning to their 2019 levels like Child Tax Credits and Earned Income Tax Credits, so you may want to check in with your tax preparer about what that might mean for you personally.  You may want to adjust your deductions if you receive a paycheck. 

The standard deduction for individuals has increased to $13,850, $20,800 for head of household, and $27,700 for married couples filing jointly.

While the tax rate hasn’t changed, the tax brackets have, so this could mean a totally different tax rate for you in 2023, so it’s definitely worth a chat with your CPA to make some plans for 2023.

If you are tired of keeping track of everything all on your own or just not having the time to keep up with your business finances, schedule a discovery call with me.  I’d be happy to listen to your problems (within reason) and come up with some solutions.  We are still accepting new clients into tax season.  Even those of you that need all of 2022 caught up.  You may just have to wait until after tax season for us to get to that project.  So, if it’s something you have been considering, talk to us now so you can get on our list.

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