The tax laws governing small to medium-sized businesses are always evolving, and business owners must stay current on the latest changes. As we move into the new tax year, knowing the changes will affect your business is important. The Law Office of Pietro Canestrelli, a Tax Controversy Boutique, APC, is here to help you navigate the upcoming tax changes for 2022/2023.

This post will discuss the latest tax changes that small to medium-sized business owners must be aware of. We’ll cover changes to the corporate tax rate, individual tax brackets, updates to the standard deduction, tax credits, and retirement plans. By keeping yourself informed, you can make the necessary adjustments to your financial plans and avoid any unexpected tax liabilities.

So, let’s look at the changes coming your way and how they may impact your business

Changes to the Corporate Tax Rate

One of the major tax changes for small to medium-sized businesses in 2023 is the corporate tax rate. For most businesses, the corporate tax rate will remain at 21%. However, businesses with taxable income of $50 million or more will see an increase in their tax rate to 28%. This increase will impact a small percentage of businesses, but it’s important to note that it can significantly impact the bottom line of those companies.

The Tax Cuts and Jobs Act (TCJA) in San Diego, California also introduced a new provision that allows for a deduction for qualified business income (QBI). This deduction enables eligible businesses to deduct up to 20% of their qualified business income from their taxable income. The rules for calculating this deduction can be complex, so it’s important to consult with a tax professional to determine if your business is eligible for this deduction.

Businesses need to stay informed about changes to the corporate tax rate and how it may impact their tax liabilities. By working with a tax professional, you can ensure that you take advantage of all available deductions and credits while also staying compliant with tax laws.

Changes to Individual Tax Brackets

Another important aspect of the 2022/2023 tax law changes that may impact small to medium-sized business owners is the changes to individual tax brackets. The Tax Cuts and Jobs Act (TCJA) brought in significant changes to individual tax brackets that will remain in effect for 2022.

The tax brackets are as follows for ERTC : 10% for taxable income up to $9,950, 12% for taxable income over $9,950 up to $41,700, 22% for taxable income over $41,700 up to $91,450, 24% for taxable income over $91,450 up to $190,200, 32% for taxable income over $190,200 up to $416,700, 35% for taxable income over $416,700 up to $418,400, and 37% for taxable income over $418,400.

For married filing jointly filers, the tax brackets are as follows: 10% for taxable income up to $19,900, 12% for taxable income over $19,900 up to $80,250, 22% for taxable income over $80,250 up to $172,750, 24% for taxable income over $172,750 up to $340,000, 32% for taxable income over $340,000 up to $416,700, 35% for taxable income over $416,700 up to $470,700, and 37% for taxable income over $470,700.

It’s important to note that the standard deduction for both single and married filing jointly filers has increased for 2022. The standard deduction for single filers has increased to $12,950, and the standard deduction for married filing together filers has risen to $25,900. Additionally, the personal exemption has been eliminated under the TCJA.

These changes to individual tax brackets will impact small to medium-sized business owners who file their taxes as individuals or married filing jointly. Business owners must review their tax brackets and adjust their withholdings or estimated tax payments accordingly to avoid any surprises come tax time.

Updates to the Standard Deduction

The standard deduction is an amount taxpayers can deduct from their taxable income without itemizing their deductions. The standard deduction has increased for 2022, which can provide some relief for small to medium-sized business owners.

For single filers, the standard deduction for 2022 is $12,950, up from $12,550 in 2021. For married filing jointly filers, the standard deduction for 2022 is $25,900, up from $25,100 in 2021.

Small to medium-sized business owners can reduce their taxable income and lower their tax liabilities by taking advantage of the standard deduction. However, it’s important to consult with a tax professional to determine if itemizing deductions may benefit your situation more.

The 2022/2023 tax changes significantly affect small to medium-sized business owners such as those living in the city of Temecula. From changes to corporate tax rates to individual tax brackets, business owners need to stay informed and plan accordingly to minimize any tax liabilities. Understanding these changes can help business owners optimize their tax strategies, take advantage of available deductions, and comply with the new regulations. Working with a qualified tax professional is important to ensure you are taking full advantage of the new tax laws and minimizing any potential tax liabilities. By staying informed and proactive, small to medium-sized business owners can navigate the changing tax landscape and set themselves up for long-term success.