Taxes are one of the expenses that can hit small businesses hardest, and any time tax laws are changed, it’s often small businesses that suffer. 

Unfortunately, this may be one of those times: small businesses could face higher taxes in 2023, mainly due to the implementation of the 2022 Inflation Reduction Act (IRA) and the expiring temporary provisions in the 2017 Tax Cuts and Jobs Act (TCJA). 

The Inflation Reduction Act

The IRA, signed by President Biden on August 16, 2022, is aimed at curbing inflation and climate change and making health care more affordable. While it’s designed to help small businesses in some ways, it may also increase your taxes. 

That’s mainly because it imposes a 15% alternative minimum tax on corporate book income: the profits a corporation makes and reports to shareholders before applying tax credits and deductions. 

Other tax hikes proposed by President Biden could make it harder for small businesses to hire employees, offer benefits, and invest in new equipment, which may decrease the number of deductions they can take when tax season rolls around. 

Tax Cuts and Jobs Act

The TCJA was put in place in 2017 to stimulate the economy. Among other things, it increased the standard deduction and family tax credits, lowered tax rates, and changed the income level of individual tax brackets. But all good things come to an end, and most of the provisions in this act will expire in 2025. 

Oh well, that’s still a couple years out, right? Yes and no. While the tax cuts outlined in the Tax Cuts and Jobs Act won’t fully expire until 2025, they started phasing out in 2021. Experts estimate that in 2023, anyone making under $40,000 (about 43% of taxpayers) will be hardest hit by those expiring provisions. 

Other expiring tax laws

Ironically, there’s one rule in the Tax Cuts and Jobs Act that’s back in force this year. In 2019 and 2020, you could carry a net operating loss back five years, or carry it forward indefinitely. Today, that suspension is no longer in place, meaning that you can no longer deduct a loss  above $540,000 (for married taxpayers filing jointly) or $270,000 (for single taxpayers). However, you can carry anything above those losses forward to future tax years. You also can’t use W-2 wages to offset business losses. 

The charitable contribution rule has also expired: this allowed individuals and C corporations to deduct a greater amount of income for charitable contributions. 

But it’s not all doom and gloom—there are plenty of helpful tax changes this year. For example, the SECURE Act increases the tax credit you can claim for contributing to employee pensions. And there are always things like start-up costs and home office expenses that you can deduct. 

Use TaxGlobal to find a CPA who can help you take full advantage of all these deductions and more.