You put in a lot of effort to ensure your small business thrives, and it’s essential not to miss out on any tax deductions that can boost your savings. Let’s explore the most significant small business tax changes for 2023, details about solar energy installation credits, and electric vehicle credits. We will also list all possible tax write-offs for sole proprietors or small businesses with employees.
Different deductions apply depending on your business structure—whether it’s a sole proprietorship, LLC, S-Corp, or another classification.
We’ll start with the key changes for 2023, provide updated information about solar energy installations, and then list the top 25 tax deductions for small businesses.
### Key Small Business Tax Changes for 2023
#### Maximum Net Earnings
For 2023, the maximum net self-employment earnings subject to the Social Security part of the self-employment tax is $160,200. There’s no maximum limit on earnings subject to the Medicare part.
#### Standard Mileage Rate
The standard mileage rate for operating your vehicle for business use in 2023 has increased to 65.5 cents per mile.
#### Redesigned Form 1040-SS
In 2023, you can file Schedule(s) C and SE (Form 1040) along with Form 1040-SS, if applicable.
#### Bonus Depreciation
The bonus depreciation deduction under section 168(k) is phasing out in 2023, reducing the limit from 100% to 80%.
#### Form 7205
This form is used to claim the energy-efficient commercial buildings deduction under section 179D for qualifying expenses. These expenses are now reported on line 27b of Schedule C (Form 1040).
#### Commercial Clean Vehicle Credit
Businesses purchasing qualified commercial clean vehicles may be eligible for a clean vehicle tax credit. Refer to Form 8936 for details.
#### Business Meal Expense
The temporary 100% deduction for business meal expenses has expired. Starting January 1, 2023, the deduction reverts to 50%.
### Solar Energy Installation Credits
Two types of tax credits are available for small business owners who installed solar energy in 2023:
#### Investment Tax Credit (ITC)
This credit reduces federal income tax liability by a percentage of the cost of a solar system installed during the tax year. For 2023, it offers a 30% tax credit if the project meets federal labor requirements.
#### Production Tax Credit (PTC)
The PTC is a per kilowatt-hour (kWh) tax credit for electricity generated by solar and other qualifying technologies for the first 10 years of a system’s operation. Systems placed in service in 2022 or later, and beginning construction before 2033, are eligible for these credits if they meet specific Treasury Department labor requirements or are under 1 megawatt (MW).
### Top Tax Deductions for Small Businesses
Knowing the deductions available can significantly reduce your annual tax liability. Here are the top 25 small business tax deductions:
1. **Home Office Deduction**: Deduct expenses if you use part of your home for business purposes.
2. **Real Estate Taxes**: Claim real estate taxes for business properties.
3. **Business Meals**: Deduct 50% of business-related meal expenses.
4. **Legal and Professional Fees**: Deduct fees paid to attorneys, accountants, etc.
5. **Business Property Rental**: Deduct rental payments for business properties.
6. **Mortgage Interest**: Claim the interest on business property mortgages.
7. **Health Insurance Premiums**: Deduct premiums paid for yourself or employees.
8. **Business Education Expenses**: Deduct costs for business-related seminars and courses.
9. **Internet Expenses**: Deduct internet service costs used for business.
10. **Business Equipment**: Deduct the cost of equipment and associated repairs.
11. **Business Insurance Premiums**: Deduct costs of business-related insurance.
12. **Business Travel Expenses**: Deduct travel costs for business purposes.
13. **Office Supplies**: Deduct costs of office supplies like paper and ink.
14. **Advertising & Marketing Costs**: Deduct expenses related to marketing and advertising.
15. **Phone Expenses**: Deduct charges for business phone use.
16. **Business Vehicle Expenses**: Deduct fuel, maintenance, and mileage for business cars.
17. **Employee Compensation**: Deduct salaries and additional compensation for employees.
18. **Startup Costs**: Deduct expenses involved in starting a new business.
19. **Professional Service Fees**: Deduct costs for professional services like accounting.
20. **Retirement Contributions**: Deduct contributions to retirement plans for yourself and employees.
21. **Bad Business Debt**: Deduct debts owed to your business that are uncollectible.
22. **State Tax Deductions**: Check local rules for
