Have you downloaded our Year End Tax Planning Guide for Businesses? You will want to check it out for some valuable tax strategies heading into 2024. Here are three important tax considerations and our tips for maximizing savings in 2024.

1. Section 174 Capitalization of Specified Research & Experimental Expenditures- Research & Experimental (R&E) expenditures generally refer to Research & Development (R&D) costs in the experimental or laboratory sense and include costs related to activities intended to discover information that would eliminate uncertainty about the development or improvement of a product. Some of these expenses may also qualify your company for the dollar-for-dollar federal R&D tax credit.
   
   Under section 174, beginning January 1, 2022, the Tax Cuts and Jobs Act (TCJA) eliminates the option to immediately deduct US-based R&E expenditures. Instead, it requires that they be charged to a capital account and amortized over five tax years, beginning with the midpoint of the tax year in which the expenditures are paid or incurred. For foreign research, the amortization period extends to 15 tax years.
   1. Tip for affected businesses heading into 2024: Good recordkeeping is essential to identify such R&E expenditures in your income statement. If you are paying contractors for R&E work in a foreign country, these costs need to be amortized over 15 years vs. 5 years if the work is being done in the U.S. Therefore, a cost/benefit analysis should be done on the savings overall for the foreign wages and if the expertise is available in the U.S.
2. BOI Reporting- Beneficial Ownership Information (“BOI”) reporting is an attempt by the U.S. government to combat fraud, money laundering, trafficking and other nefarious activity that historically could be obscured by the use of “shell” companies. Most existing and new U.S. corporate entities will be required to file reports with the federal government (starting January 1, 2024) regarding their beneficial owners.
   1. Tip for affected businesses heading into 2024: Check out our blog, Prepare Your Business for Beneficial Ownership Information Reporting Effective January 2024 FINCEN is also a great resource, as they update their frequently asked questions with the most up to date information (www.fincen.gov/boi-faqs)
      
3. Section 163(j) disallowance rules-Business interest expense is the cost of interest that is charged on business loans used to operate the business; it is deductible as an ordinary business expense, under section 163(j) of the tax code. The loan, for which you are incurring interest on, must be used to either purchase assets for the company or pay for business expenses.
   
   You can deduct interest on business loans if you are legally liable for the debt, both you and the lender intend that the debt be repaid, and you and the lender have a true debtor-creditor relationship. However, the Tax Cuts and Jobs Act (TCJA) generally limits deductions for business interest to 30% of adjusted taxable income (ATI). This unfavorable provision was intended to generate revenue to offset tax cuts elsewhere in the TCJA.
   1. Tip for affected businesses heading into 2024: With businesses experiencing higher interest rates than the past few years, those subject to the 163(j) rules should be aware of possible interest limitations and not be caught off guard at tax filing time.

Wondering if your business can benefit from any of these strategies? We can help. Contact us.