On the Shop Floor
Every year, legislators make new regulations and changes to the tax code, and 2023 is no exception. On this episode of On the Shop Floor, Weaver’s Partners-in-Charge of Manufacturing, Distribution, and Retail Services, Colby Horn and Jody Allred, sat down to talk with Weaver’s Tax Services Partner, Kurtis Dixon on the latest developments and tax changes in 2023.
- Big tax changes are coming in 2023 for businesses and clients
- Bonus depreciation will be lowered from 100% to 0% in the next few years
- R&E costs will now have a five-year amortization attached
Dixon detailed some of the biggest changes happening in 2023 and modifications to how companies are taxed. One of those changes is in bonus depreciation, which has allowed businesses to deduct purchases upfront. “For years it’s been 100%, prior to that a mixture of 100% and 50%, so there’s been a lot of change, but we’ve been in an environment where you spend money, you take the deduction for tax purposes. That is changing in 2023. So that 100% bonus depreciation has changed to 80% now. So, if clients didn’t make some moves prior to year-end, and now they’re spending money, there’ll be less of that immediate tax benefit. And then in 2024 that changes to 60% and a ratchet down to 20% years after, so bonus depreciation is a really big change,” Dixon said.
Another change comes in the form of Section 174, which is about deductions related to research and experimentation (R&E). Previously, clients could easily “expense it”, meaning any and all R&E costs could be expensed without the client needing to look into the details of whatever may have been researched and experimented. Not so in 2023, when clients and businesses will have to look into their R&E costs before expensing. “Now it is a five-year amortization. So, are you able to identify those costs? Are you able to deduct some of them if they weren’t classified in the past?” Dixon explained.