Great Tax Planning Meetings

Please excuse the informality and shortness of this post.  The 10/15 tax deadline is quickly approaching but I wanted to share a few things on my mind after having a great tax planning meeting today.

In my mind, great tax planning meetings always end with three questions…

“Anything else I should know?”

“Any changes are coming?”

“What do I owe you?”

The last question I say in jest, but it’s always nice to give when clients ask and value my knowledge and time.  The first two questions are the crux of this quick post.  Here is how I would answer those questions as of today.

2022

• Last year of 100% bonus depreciation
• Last year of 100% business meals deduction
• Interest will get harder to deduct for certain real estate properties via changes in the 163j rules. In short, limited partners may get less tax loss.

2023

• Bonus depreciation capped at 80% of asset cost!
• Changes in the 45L energy efficiency credit for residential properties changes
• https://ics-tax.com/news/the-inflation-reduction-act-impact-on-45l-tax-credit/

2024

• Bonus depreciation capped at 60% of asset cost!
• This is also an election year. All bets are off on what tax reform bills try to get passed.

2025

• Bonus depreciation capped at 40% of cost

2026

• Bonus depreciation capped at 20% of asset cost
• Tax Cuts & Jobs Act (2018 Trump Tax Law) individual provisions sunset.
• Tax brackets go back up
• Standard deduction reverts to old laws and is essentially cut in half
• Lifetime estate exemption reverts to 5MM from 11MM
• IRC Section 199A Qualified Business Income deduction disappears. This is the 20% reduction in business income for small business owners.
• State and local income tax cap is gone. You are no longer limited to a $10,000 deduction for state and local income and property taxes when itemizing deductions.

2027

• Bonus depreciation is disallowed.

So what to do

• Consider adopting energy efficient building components or build solar soon. The Inflation Reduction Act of 2022 (“IRA”) recently changed things as well.  My former list used to note an upcoming decline in the Solar Investment Tax Credit, but the IRA just changed that a few weeks ago
• https://www.energy.gov/eere/solar/articles/solar-investment-tax-credit-what-changed
• Gift assets away before 2026 if you are a high net worth individual. Until then you have a higher gift exemption
• If a real estate business, make a 163j real property trade or business election if suitable
• Potentially accelerate income or limit deduction in 2025 when tax rates are lower than they will be in the following year.