September 2023 Tax Planning Opportunity

September is an opportune month to form an LLC or Corporation for 2023.  Whether you are ready to launch a new business idea or have a skill or hobby that can translate into a side business, now is the time to set that up for one of the most effective tax benefits. We can set up the correct entity for you!

The proper business entity can provide a layer of personal asset protection, facilitate certain business write offs such as home office deduction, provide you control of Social Security and Medicare (Self-Employment Tax) and possibly reduce audit risk.

The 2018 tax bill eliminated Unreimbursed Employee Expense deductions at the federal level. As an employee, you can no longer write off any work-related expenses, including a home office deduction at the federal level. And yet, many employees are still working from a home office. The best workaround to write off business expenses, including a home office deduction, is to set up a side business, “side hustle.” We can help you choose and set up the proper business entity for 2022.

Additional Key Tax Planning Points for 2023

• Create a business entity to facilitate business expense deductions.
• The challenging investment environment may provide loss harvesting opportunities. Realize losses for ’23 by selling the losing positions!
• If the challenging environment has lowered your income, consider converting your IRAs to Roth IRAs at the current year tax rates.
• Incur business necessary business expenses in 2023 or prepay 2024 expenses using the IRS safe harbor rules.
• With bonus depreciation and increased limits for expensing equipment, you may be able to deduct up to 100 percent of last-minute costs in 2023.
• Remember that a business credit card charge expense is deductible the day you charge, regardless of when the credit card payment is made.
• Cash basis entities can defer billings until January of 2024 to defer income.
• Maximize your employee pre-tax plans, such as 401(k)s, 403(b)s, Health Savings Accounts (HSA), Dependent Child Care Flexible Spending accounts.
• California’s AB150 created a workaround for the state tax deduction, State and Local Tax (SALT) cap of $10,000.  It creates an elective tax that allows state taxes on pass-through income to be paid at the entity level. Qualified owners can make the election to pay the elective tax at a rate of 9.3% on the qualified owner’s share of net income

We have a lot of flexibility to work together in person in Los Angeles or San Diego or by phone or video conference!  Call or e-mail to schedule tax planning time to minimize your 2023 taxes!

Please contact Brenda@taxplus.com , 310.398.3231 or contact Nicole@taxplus.com , 858.279.1640 to request a phone or video conference with one of our Enrolled Agents.

We look forward to tax planning with you!

TaxPlus Team