As the year draws to a close, it’s prime time to delve into strategic tax planning that can not only benefit your current financial year but also set the stage for the upcoming one. Crafting a successful tax strategy hinges on factors like expected income and deductions fluctuations, coupled with potential life changes on the horizon.

Missouri SALT Parity Act: A Game-Changer for Pass-Through Entities

Effective for tax years concluding on or after December 31, 2022, the Missouri SALT Parity Act brings a pivotal change for pass-through entities. S-corporations and partnerships can now opt to be subject to Missouri income tax at the entity level. This move allows these entities to deduct state income tax without being shackled by the federal $10,000 state and local tax deduction limit on individual owners’ Form 1040 tax returns. Moreover, making a payment before year-end could pave the way for a 2023 deduction for the pass-through entity. This act aligns with similar provisions in other states, presenting potential advantages for Missouri residents involved in out-of-state businesses.

Bonus Depreciation: Consider Accelerating Asset Purchases

In recent years, bonus depreciation has been a boon for business owners, enabling them to instantly deduct 100% of the cost of most machinery and equipment purchases. However, beginning January 1, 2023, this allowance dwindles to a first-year maximum deduction of 80%, set to decrease further to 60% from January 1, 2024. To capitalize on these expiring benefits, consider expediting planned asset purchases before the year concludes.

Inflation Reduction Act: Unveiling Tax Credits for Energy-Efficient Additions

The Inflation Reduction Act of 2022 introduces a slew of new tax credits linked to solar, electric, and other energy-efficient enhancements for your home, business, and personal property assets. Additionally, tax credits for qualified plug-in electric drive motor vehicles and certain ‘clean’ vehicles have been included, presenting opportunities for substantial savings.

SECURE Act 2.0: Enhancing Retirement Savings Opportunities

Building on its predecessor, the SECURE Act 2.0, passed in December 2022, ushers in several provisions aimed at expanding and fortifying retirement savings. Key highlights include an increase in the required minimum distribution (RMD) age to 73 for those turning 72 after December 31, 2022, expanded catch-up contribution provisions, and the elimination of RMDs for qualified employer Roth plan accounts starting in 2024. Numerous other opportunities, from tax-free transfers to enhanced employer credits, make the SECURE Act 2.0 a pivotal consideration for both businesses and individuals.

The Clock Is Ticking For The Year-End

Let’s explore potential tax-saving strategies and reassess the need for fourth-quarter estimated tax payments together. Contact your KPM tax advisor.