The 2023 tax year will look different for small business owners as new government policies and IRS changes affect the amount business owners are required to pay.
Key Details
- U.S. businesses will be subject to higher federal tax burdens following the passage of the Inflation Reduction Act (IRA) and the phasing out of the 2017 Tax Cut & Jobs Act.
- Arkansas, Nebraska, New Hampshire, and Pennsylvania have already enacted their proposed corporate income tax cuts, Forbes reports.
- Small business owners should also note that the IRS announced that many key tax provisions will increase by around 7% due to inflation adjustments for the 2023 tax year.
- This could result in some taxpayers staying in lower tax brackets, and some may even see a smaller tax bill in 2024, Nerd Wallet reports.
Why it’s news
Inflation pushed costs higher for many business owners this year, which means there will be some changes in how much they end up paying in taxes. While federal rates may be jumping, cuts at the state level could even things out.
Arkansas, Nebraska, New Hampshire, and Pennsylvania have introduced new corporate tax relief laws. In many cases, these tax relief laws have received bipartisan support.
For example, Pennsylvania’s Republican-led legislature worked alongside Democrat Governor Tom Wolf to drop the state’s corporate income tax rate from 9.99% to 8.99%.
More dramatic tax cuts will go into effect in other states in the coming months. North Carolina is phasing out its corporate income tax entirely by 2030.
With growing bipartisan support for tax relief, more states are passing bolder tax cut laws, a relief for many business owners. Federal changes may drive up taxes for many taxpayers, but the relief legislation in many states will offset the heavy burden.
The continued bipartisan support for these tax relief laws is another good sign for taxpayers. Legislative changes at the federal tax level are unlikely as a divided Congress struggles to work together. At the state level, however, more legislators are willing to work alongside one another to provide citizens with relief.