Page 18 - BusinessWest December 12, 2022

Year-end Tax Planning
Legislation Continues to Impact Strategies for Individuals, Businesses
By Kristina Drzal Houghton, CPA, MST
As another tumultuous year draws to a close, both individuals and small-busi- ness owners are advised to assess their current tax situation, with an eye on maximiz- ing available tax breaks and avoiding potential tax pitfalls. Planning should be based on the latest laws of the land.
Just look at the significant legislation enacted in recent years. Following the massive Tax Cuts and Jobs Act (TCJA) of 2017, the Coronavirus Aid, Relief, and Economic Security (CARES) Act addressed various pandemic-related issues in 2020. In quick succession, the Consolidated Appropriations Act (CAA) extended certain CARES Act provisions and modified others, while the American Rescue Plan Act (ARPA) created even more tax-saving opportunities in 2021.
This series of new laws culminated in the Inflation Reduction Act (the IRA), passed in August 2022. The IRA, which is generally effective next year, includes several provisions that could have a big tax impact on individuals and busi- ness entities.
And we still might not be done. More pro- posed legislation has been introduced in Con- gress. If another new law featuring tax provisions is enacted before 2023, it may require you to revise your year-end tax-planning strategies.
BUSINESS TAX PLANNING Depreciation-based Deductions
As we head into year-end, a business may benefit from one or more of three depreciation- based tax breaks: the Section 179 deduction; first-year ‘bonus’ depreciation; and regular depreciation. In consideration of this, consider the following:
Place qualified property in service before the end of the year. If your business does not start
using the property before 2023, it is not eligible for these tax breaks.
Section 179 deduction: under Section 179
of the tax code, a business may ‘expense’ (i.e., currently deduct) the cost of qualified property placed in service any time during the year. The maximum annual deduction for 2022 is $1.08 million and is phased out on a dollar-for-dollar basis when total additions exceed $2.7 million. Be aware that the Section 179 deduction cannot exceed the taxable income. This could limit your deduction for 2022.
‘Tis the season
Holidays bring good cheer.
With friends and family? That’s better.
This time of year is for celebrating everything that makes life worth living—including our close-knit communities and the people we care about. Being surrounded by those you can count on? There’s nothing better.
Happy holidays from all of us at Westfield Bank.
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18 DECEMBER 12, 2022
BANKING & FINANCE
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