Page last reviewed or updated: January 10, 2024

Tax Law for Business Filers 

• NEW FOR 2024: Beneficial Owner Information Report (Mandatory Filing)
  • For existing businesses, the Corporate Transparency Act (CTA) goes into effect on January 1, 2024, and imposes a brand-new federal filing requirement on most corporations, limited liability companies, and limited partnerships and on certain other business entities.
  • No later than December 31, 2024, all non-exempt business entities must file a beneficial owner information report (BOI report) with the Financial Crimes Enforcement Network (FinCEN)—the Treasury Department’s financial intelligence unit.
  • The BOI reports must disclose the identities and provide contact information for all of the entity’s “beneficial owners”: the humans who either (1) control 25 percent of the ownership interests in the entity or (2) exercise substantial control over the entity.
  • The report can be filed online at https://boiefiling.fincen.gov/
• The taxable income of a C Corporation is taxed at a flat rate of 21%.
• Like-kind exchanges are only allowed for real estate transaction exchanges. They are no longer allowed for personal or intangible
• For trade-ins of business autos, the transaction is treated as the sale of the old auto and purchase of the new one. Any gain on the old auto must be reported and included in income.
• Employers must include moving expense reimbursements in employee wages unless the employee (or their spouse or dependents) is an active member of the U.S. Armed Forces.
• When an S Corporation or Partnership fails to file its return by the due date (or the extended due date), the IRS will impose a $220 penalty for each month or part of the month the return is late multiplied by the number of shareholders or partners.
• Most taxpayers no longer have the option to carryback a Net Operating Loss (NOL). NOLs arising in Tax Years ending after 2020 can only be carried forward. In addition, for losses arising in taxable years beginning after December 31, 2020, the net operating loss deduction is limited to 80% of the excess (if any) of taxable income. Excess NOLs generally may be carried forward indefinitely.
• A noncorporate taxpayer may be subject to excess business loss limitations. An excess business loss is that amount by which the total deductions attributable to all your trades or businesses exceed your income from those trades or businesses plus a threshold amount. For 2023, the threshold amounts are $578,000 for Joint Filers and $289,000 for all other filers.
• Any business that pays at least $600 for services performed by a person who is not their employee is required to file Form 1099NEC.
• Form 1099-K reporting remains the same in 2023 with the $20,000 threshold and 200 transactions minimum. The proposed 2024 threshold is $5,000.
• As of 2022, the IRS requires Form 7203 for S Corporations. The IRS requires S Corporation shareholders to prepare and attach Form 7203 to their personal tax return. This form is used to track the Shareholder’s Stock and Debt Basis. It is also used to figure potential limitations of a taxpayer’s share of the S Corporation’s deductions, credits, and other items that can be deducted on their personal tax return.

General Business Deductions 

• A deductible business expense must be both ordinary and necessary. This means it is an expense that is common and accepted in the taxpayer’s line of work and is helpful and appropriate for work. Generally, a business can deduct legitimate expenses even if the expenses exceed income from the activity. There are some instances when the deductible amount of business losses may be limited.
• Services in trade are not deductible as a business expense. If the taxpayer provides services as payment for a business expense, the deductible amount is limited to actual out-of-pocket expenses paid.
• A business bad debt occurs when a taxpayer is owed money that cannot be collected. To be deductible, the amount owed must have already been included in taxable income in a previous year. In addition, loans made to clients and suppliers that become worthless can also be deductible in some instances.
• A taxpayer is allowed to deduct up to $5,000 of start-up costs and $5,000 of organizational expenses in the taxable year in which its business begins, but only if the total startup costs are $50,000 or less. The costs remaining after this deduction should be amortized annually over the next 15 years.  
• Repairs and maintenance can generally be deducted in the same way as any other business expense. These are costs to keep the property in good operating order that do not materially add value to the property or prolong its useful life. Examples of deductible items include repainting, fixing gutters and leaks, replacing broken windows, servicing office equipment and cleaning and lubricating machinery.
• Insurance premiums that are not deductible include amounts paid into a self-insurance fund, loss of earnings policies that pay for the taxpayer’s lost earnings due to sickness or disability, life insurance and annuities if the taxpayer is directly or indirectly a beneficiary of the policy and insurance to secure a loan. However, premiums for overhead insurance that pay for business overhead expenses due to the taxpayer’s disability are deductible.
• Deductible business gifts for customers and clients are limited to $25 per individual per year.
• Special rules apply for substantiation of expenses for meals, travel, and lodging. Records must be maintained that include the amount and purpose of the expense, time and place and the business relationship between the parties.
• NEW FOR 2023. Business meals are deductible if incurred while traveling on business or while entertaining a client, customer, or employee. For Tax Year 2023 businesses can only claim 50% of these costs.
• Travel and lodging expenses are ordinary and necessary expenses incurred by a taxpayer while on temporary travel away from his or her tax home for business purposes. Generally, you are considered traveling away from home if your business duties require an absence that is substantially longer than a day’s work. Deductible expenses may include air, train, bus or car travel between your tax home and business destination as well as transportation, lodging and other ordinary and necessary expenses related to the business travel. Travel as a form of education is not deductible and business travel by ocean liner, cruise ship or other forms of “luxury” water transportation is subject to limitations.
• Instead of deducting the actual expenses of business use of an automobile, a taxpayer may use the standard mileage rate The business standard mileage reimbursement rate for 2023 is 65.5 cents per mile. The standard mileage rate is also allowed for leased vehicles. If chosen, the standard mileage rate must be used for the first year placed the vehicle is placed in service and continued for the entire lease term. For 2024, the standard mileage rate for business increases to 67 cents per mile.
• In general, the deduction for any expenses related to activities considered entertainment, amusement or recreation are not allowed. Examples include entertaining guests at nightclubs, social, athletic, and sporting clubs, theaters, sporting events, yachts, vacations, and other similar trips.
• Membership dues with respect to any club organized for business or other social purposes cannot be deducted. This includes country clubs, golf, and athletic clubs. Professional organizations relating to the business trade can be deducted.

Qualified Business Income Deduction (QBID) 

• For Tax Years 2018 through 2025, eligible taxpayers may be able to deduct up to 20% of qualified business income from a domestic business operated as a sole proprietorship or through a Partnership, S Corporation, Trust, or Estate. Here is a general overview of the deduction.
• Businesses that do not qualify for this deduction include businesses conducted through a C Corporation and wages earned as an employee.
• The deduction is taken for Partnerships and S Corporations at the individual or shareholder level. The amounts are reported to taxpayers on the Schedule K-1 they receive from the Partnership or S Corporation. An Estate or Trust may also pass-through the amounts on the beneficiary’s Schedule K-1.
• The deduction is generally limited to the lesser of (1) 20% of qualified business income or (2) 20% of the taxpayer’s income minus net capital gains. For 2023, the amount of the deduction is gradually reduced and may be phased out if your taxable income before the QBID exceeds $364,200 for Married Filing Jointly Filers, $182,100 for all other filers.

Depreciation 

• Property improvements. If you improve property that you are already depreciating, you must treat the improvement as a separate depreciable property. Improvement means an addition to or partial replacement of property that results in a betterment, restores the property, or adapts it to a new or different use. Examples include room additions, a new roof, new flooring, new heating/cooling, new plumbing systems and installing a security system. The cost of these types of improvements is depreciated according to the same class and recovery period of the original property.
• Special Depreciation Allowance (Bonus Depreciation). The special depreciation allowance allows Bonus Depreciation to 100% for all qualified purchases made between September 27, 2017, and January 1, 2023. Bonus Depreciation decreases to 80%, starting in 2023. Bonus depreciation will continue to decrease for ensuing years: 60% for 2024, 40% for 2025, 20% for 2026, and 0% beginning in 2027. This deduction applies to depreciable business assets and certain other property. Machinery, equipment, appliances, and furniture generally qualify.
• Used property acquired may also qualify for this special depreciation. In order to qualify, the used property must be the taxpayer’s first use. In addition, the property must not have been acquired from a related party.
• Qualified business property does not include property placed in service and disposed of in the same tax year or property converted from business use to personal use in the same tax year acquired.
• Special depreciation is the default method for qualifying property in the year placed in service. If you do not wish to take this deduction, you must attach a statement to your return indicating that you are “electing out” of this deduction.
• Section 179 Expense Deduction. The Section 179 deduction is generally the cost of the qualifying property. However, the total amount a taxpayer may elect to deduct under Section 179 is subject to maximum deduction dollar limits, investment limits and a business income limit.
  • The Section 179 maximum deduction dollar limit for 2023 is $1,160,000.
  • Sport utility vehicles (SUVs) are limited to a Section 179 deduction of $28,900.
  • If the cost (the investment amount) of Section 179 property placed in service in 2023 exceeds $2,890,000 the available deduction is reduced by the amount of the excess (but not below zero). Amounts disallowed because of the investment limit may not be carried forward.
  • The maximum Section 179 deduction cannot exceed your business income.
  • Taxpayers may elect to claim improvements made to nonresidential property as a Section 179 deduction if the qualified improvements were made after the date the property was first placed in service.
• Luxury Automobile Limits. Annual limits for depreciation apply to most passenger automobiles, trucks, and vans. These limits are referred to as “luxury auto limits.”
• Passenger automobiles that qualify for the special depreciation allowance are eligible for an increased first-year depreciation limit. For 2023, the first-year depreciation limit is $20,200 if the special depreciation allowance (bonus depreciation) is claimed. If the taxpayer does not claim the special depreciation allowance, the highest first-year depreciation deduction is $12,200. The higher limit does not apply to the Section 179 expense. For 2023, the combined Section 179 expense and regular depreciation cannot exceed $12,200 for the first year.
• For vehicles used 50% or less for business, the taxpayer is not eligible to claim the special depreciation allowance (bonus depreciation). In addition, there are different depreciation rules that must be applied.

• REMINDER: Annual Reports for all Florida Corporations, including Limited Liability Companies and Professional Associations, are required to be filed with the Florida Department of State. You should receive an email from the State of Florida with the details. The 2024 Annual Report is due by 11:59 PM EST on Monday, May 1, 2024. After May 1, a $400 late filing penalty will be assessed by the state. The report can be filed online at sunbiz.org.