With 2023 coming to a close , now is an ideal time for individuals and businesses to explore tax – planning strategies that may help reduce their overall tax bill . Of significant consideration for taxpayers to be aware of are the several tax changes introduced in the Tax Cuts and Jobs Act ( TCJA ). Several TCJA-related tax rules are scheduled to expire or fully sunset in 2025 , making the next 18 months crucial for tax planning , unless new legislation is passed .
Below is an overview of some key tax considerations to be aware of as you approach year-end .
7 TAX PLANNING CONSIDERATIONS AHEAD OF
THE GREAT TCJA SUNSET
By Vivian Peng , CPA Tax Shareholder
With 2023 coming to a close , now is an ideal time for individuals and businesses to explore tax – planning strategies that may help reduce their overall tax bill . Of significant consideration for taxpayers to be aware of are the several tax changes introduced in the Tax Cuts and Jobs Act ( TCJA ). Several TCJA-related tax rules are scheduled to expire or fully sunset in 2025 , making the next 18 months crucial for tax planning , unless new legislation is passed .
Below is an overview of some key tax considerations to be aware of as you approach year-end .
1 . Qualified Business Income ( QBI ) Deduction
Pass-through entities , including partnerships , limited liability companies , S corporations and sole proprietors , can deduct up to 20 % of its QBI . This is subject to certain limitations based on W-2 wages paid , the unadjusted basis of qualified property and taxable income . This deduction is set to expire in 2025 , so qualifying entities should take advantage of this tax-saving opportunity while they still can .
2 . Bonus Depreciation
Although the bonus depreciation deduction was decreased to 80 % for 2023 , it is still a worthy tax benefit for businesses that own machinery , computer systems , software , certain vehicles , equipment or office furniture , to name a few . Under the current phase-out schedule , this deduction will decrease by 20 % each subsequent year through 2027 , so we encourage you to maximize the current deduction amount . Note , the Inflation Reduction Act of 2022 included a tax credit allowing companies looking to install solar panels or purchase electric vehicles to reap the benefits of both bonus depreciation and energy tax credits .
3 . Estate Tax and Gift Tax Exemptions
The annual exclusion and tax exemptions increased in 2023 , with the gift tax annual exclusion increasing to $ 17,000 , and the estate and gift tax exemption to $ 12.92 million ( both adjusted for inflation ). The gift tax exclusion is the amount you may give each year without depleting any of your gift and estate tax exemption . The gift and estate tax exemption is the amount you can transfer without being subject to a 40 % tax . The gift and
12 VIEWpoint Issue 2 | 2023