Tax-Saving Tips for Business Owners: Navigating 2023 Tax Implications

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As a business owner, it’s important to stay informed about the latest tax laws and regulations in order to maximize your tax savings. With the start of the new tax year, it’s time to take a closer look at your investments and understand the tax implications of various investment strategies. In this blog post, we will provide tax-saving tips for business owners to help navigate the 2023 tax implications of different investments and ultimately reduce your tax liability.

Also Read: Tax-Saving Tips for Business Owners: Navigating 2023 Tax Implications

Know the $75 Rule for Business Expenses

The $75 rule says that you don’t need a ticket for some business costs that cost less than $75. But I want to stress that not all tax exemptions follow this rule. Many taxpayers make the mistake of applying the $75 rule to all of their tax deductions. This can cause them to lose a lot of deductions and pay fines. I want you to know about the $75 rule and how it works so that you can avoid any bad things that could happen.

The $75 rule is found in IRS Reg. Section 1.274-5(c)(2)(iii), and Notice 95-50 make it clear when it applies. The rule applies to work travel costs, vehicle costs, and gifts that cost less than $75. But remember that you can only deduct up to $25 for business gifts, so the real cap is $25.

It’s important to know that your bank and credit card statements are not enough proof of spending for taxes. To prove what you spent, you need both the receipt (which shows what you bought) and a canceled check or credit card account (which shows how you paid).

Even though the $75 rule may let you get by without a receipt for some costs, it is very important to keep track of all your expenses in the right way. For example, if you ate a $60 meal while on deductible business travel, you need to show the amount spent, the date of the meal, the name and location of the restaurant, and whether or not you have a receipt.

Even though you don’t need a receipt for the $60 trip meal, having one makes it easier to keep track of your expenses. We recommend that you keep all of your receipts for tax reasons because they are often easier to keep track of and better proof in case the IRS audits you. If you want to talk about the $75 rule.

If I Hire My Kids, Can I Give Them Tax-Free Education Benefits?

If your kids work in your business, you might want to give them extra money for school. When this is done right, the business gets tax breaks and the child gets tax-free schooling benefits. You can do this without a Section 127 plan if your child needs the education to do a job for your business or to follow a law or rule. In general, you can’t think of a bachelor’s degree as training for work. If you pay for these programs outside of a Section 127 plan, you must count the money as taxable income for the child-employee.

But some courses within a school can be looked at on their own, and some courses, like accounting classes for an employee’s child who works in accounting, may qualify for tax-free working condition fringe benefit payments. On the other hand, MBA programs can be considered work-related education if they keep or improve the skills of the employee in his or her present job or business. In addition to the above options, if your child is 21 or older, the Section 127 plan can give them up to $5,250 in tax-free benefits for schooling.

Business Gym for Your Employees, and Maybe You Too

For your gym or other athletic facilities to be tax-deductible, most of your employees must use them. This doesn’t include workers who are officers, shareholders, or other people who own 10 percent or more of the business, or highly paid employees.

For the 10 percent ownership test, the law says that employees own any interest owned by their brothers and sisters, spouses, ancestors (like their parents and grandparents), and lineal descendants (like their children and grandkids). The workers who made more than $150,000 in the year before are in the highly compensated group.

The gym or other athletic facility must help the rank-and-file employees more than it helps the company or employees with high salaries. Think of this test as the main benefit of a 51-49 test.

This means that the rank-and-file workers and their families must use the facility more days than the owner and highly-paid group. Only look at the number of days you used the tool to see if you pass the 51-49 test.

Example. The gym is used by rank-and-file workers and their families 235 days a year and by the business owner and his or her family 137 days a year. The gym does well on the 51-49 scale. The people who use it don’t have to pay taxes on it, and the business can write it off as an employee recreation center.

Take Advantage of the Once-in-a-Lifetime IRA-to-HSA Rollover

Health Savings Accounts (HSAs) are meant to go with health plans with high deductibles and help you pay for medical costs. Due to the triple tax gain, they can also be a great way to save for retirement:

  • You can deduct contributions from your taxes.
  •  Your account balance grows without being taxed.
  •  Withdrawals for medical expenses are tax-free.

And after age 65, you can use the monies for non-medical purposes, the same as you can with a traditional IRA, and pay taxes at ordinary income rates but without penalties. We recommend that you fully fund your HSA each year until you enroll in Medicare and that you ideally minimize distributions. By doing so, even if you start at age 50, you could accumulate $200,000 or more by the time you reach age 65.

To assist in funding your HSA, there is a special, lesser-known rule: you can roll over funds from your IRA to your HSA once in your life through a qualified HSA funding distribution. The rollover amount is limited to your HSA contribution limit for the year. In 2023, this amounts to $3,850 for individual coverage and $7,750 for family coverage. If you are over age 55, you can add a $1,000 catch-up contribution.

The rollover amount doesn’t count as income, isn’t deductible, and reduces the amount you can contribute to your HSA for the year. The big benefit is that you turn this otherwise taxable money into tax-free money when you use it for medical expenses.

Maximizing Your Tax Deductions: Guide To Bad Debt Loss Deduction

Because of the way the economy is right now, now is a good time to think about bad debt problems. As a private taxpayer, being able to subtract losses from bad debts has always been a point of contention with the IRS. Before you can claim the deduction, you have to prove that the loss came from a real loan deal that went wrong. So be alert.

  • Don’t do things that aren’t smart, like giving a loan that turns out to be an addition to the capital of a business.
  • Avoid giving a friend or family member a casual advance that ends up being a gift.

As a single taxpayer, you count bad debts that aren’t related to your business as short-term capital losses, which are capped at $3,000 ($1,500 if you’re married and reporting separately) per year.

In order to claim a deductible bad debt loss, you must show the existence of a real debt. To do this, you must use certain things. You can show that your loans are real by using the 11-factor study from the Sixth Circuit. Here are the 11 things that we think are most important:

  • When documents talk about loans, they look like loans.
  • Loans should have a due date and a plan for paying them back.
  • A loan is shown by a set interest rate.
  • The fact that interest payments are made on time and at a set rate makes it clear that shareholder advances are loans.
  • When there is only one shareholder, supposed loans made by shareholders exactly in proportion to their stock ownership interests show equity.

Remember that you want your business to have bad debts. For this to happen, there must be a close connection between your business and the loan if you want to claim a bad debt loss for your business. The Supreme Court said that in order to pass the “proximate relationship” test, the main reason for making the loan must be business.

If you have a lot of capital loss carryovers from last year’s stock and bond market that add to your loss benefits, you may have to wait until the non-business bad debt loss saves you money on taxes.

Also Read: Tax Deductions Guide: 20 Popular Breaks

Holding Real Property in a Corporation: Good or Bad Idea?

Investing in property may seem wise, but taxes can be a significant concern. Owning real estate in a C corporation puts you at risk of double taxation. To avoid this, consider using a single-member LLC, revocable trust, or multi-member LLC depending on your situation. Single-member LLCs offer simple tax treatment and liability protection, while revocable trusts can avoid probate. Multi-member LLCs have pass-through taxation and are recommended for co-owners of real property.

Helicopter View of 2023 Meals and Entertainment

As you may already know, there have been some major changes to the business meal deduction for 2023 and beyond. The deduction for business meals has been reduced to 50 percent,  a significant change from the previous 100 percent deduction for business meals in and from restaurants, which was applicable only for the years 2021 and 2022.

Are You a Regular Investor or a Tax-Favored Securities Trader?

As we try to figure out how to deal with the recent changes in the stock market, you might want to think about how the tax code might help stock traders with their federal income taxes.

Let’s say that, for your federal income tax, you can be considered a trader in stocks. In this case, you can deduct your trading-related costs on Schedule C of Form 1040 and make the mark-to-market decision, which most investors can’t do.

Two important federal income tax benefits come from the mark-to-market election:

  1. Getting around the ceiling on capital loss deductions
  2. An exception to the rule about wash sales

But these tax breaks don’t come without a cost. As a trader who has chosen to use the mark-to-market method, you must pretend to sell your entire trading portfolio at a market on the last trading day of the year. This may or may not affect your taxes, depending on how much or how little you have in your trading portfolio at the end of the year.

For you to be a stocks trader, you must trade as part of a business, and you must meet both of the following requirements:

  1. You must trade often and for a lot of money.
  2. You should try to make money from short-term market changes instead of long-term plans.

If you’re a calendar-year taxpayer, you have until April 18, 2023, to make the mark-to-market election for your 2023 tax year. To do this, you must include a statement with your 2022 Form 1040 filed by that date or with a Form 4868 extension request for your 2022 return filed by that date.

Avoid This Family-Member S Corporation Health Insurance Mistake

Don’t make this mistake with health insurance for a family-member S corporation. There are two important things to know about S company health insurance deductions.

First, if you own more than 2% of an S company, you need to take three steps to get a deduction for health insurance:

Step 1: The cost of the insurance must be recorded in the S corporation’s books. 

Step 2: The cost of the health insurance payments must be listed on your W-2 as taxable income (but not subject to payroll taxes) by the S corporation.

Step 3: If you are qualified, you must claim the health insurance deduction on Schedule 1 of Form 1040 as an above-the-line deduction.

The three-step procedure for health insurance coverage applies to your family members (spouse, children, grandchildren, great-grandchildren, parents, grandparents, and great-grandparents) who work in your S corporation, even if they don’t own stock directly. The tax code attributes your stock ownership to them for health insurance purposes. Failing to comply could result in lost health insurance deductions for your family members and zero deductions for the S corporation. If you didn’t handle this correctly in the past, you should amend your returns to protect your tax deductions.

Also Read: How The American Families Plan Impacts The Finances And Taxes Of Americans  

SECURE 2.0 Act Creates New Tax Strategies for RMDs

If you have a tax-deferred retirement account, you must start taking required minimum distributions (RMDs) once you reach a certain age. The SECURE 2.0 Act raises the age for RMDs from 72 to 75 over the next 10 years. RMDs ensure that you use retirement account funds while alive, rather than passing them tax-free to heirs. RMDs vary based on age and account balance and are required for various types of retirement plans. The penalty for missing an RMD has been reduced to 25% (with a possible reduction to 10%) starting in 2023. To avoid penalties, make up any shortfalls and consider taking the first RMD in the year you reach the RMD age.

Everything You Need to Know About Tax Implications of Trading NFTs

NFTs (non-fungible tokens) are digital certificates of ownership for virtual or physical assets, such as digital art, collectibles, music, virtual real estate, etc. For tax purposes, NFTs are treated as collectibles and are subject to capital gains tax and early withdrawal penalties if purchased with an IRA. When exchanging Ethereum for an NFT, capital gains or losses need to be recognized, and subsequent sales of NFTs will also trigger capital gains or losses. Creators receive ordinary income when selling NFTs and donations by NFT creators hold little value. Gifts of NFTs to others are not taxable events and transactions must be reported correctly on IRS Form 8949 and transferred to Schedule D of Form 1040.

Also Read: 5 Ways Hiring a Bookkeeper can make Profitable Business 


In conclusion, navigating the 2023 tax implications of various investments can be a complex and overwhelming task for business owners. However, with the right knowledge and strategies, it’s possible to maximize your tax savings and reduce your overall tax liability. By keeping track of your expenses, understanding tax laws and regulations, and exploring different investment options, you can ensure that you are taking advantage of all available tax-saving opportunities.

If you want to learn more about this topic or need help with your business taxes, visit finaccurate.com. Our team of experts can provide you with personalized tax advice and support to help you navigate the tax landscape and achieve your financial goals.

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