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Gerstein Quoted In Philadelphia Inquirer – Businesses Facing Higher Taxes

The good news for 2023 is that it seems unlikely that there will be any major tax legislation coming our way. However, thanks to some of the expiring provisions from 2017′s Tax Cuts and Jobs Acts, some small businesses could already be facing a significantly higher tax bill this year for two big reasons.

  1. Research and development expenses are less deductible.
  2. Depreciation on new purchases is limited.

Starting in 2022 a business now has to amortize — gradually write off — those expenses over five years and can only deduct 10% of those expenses in the first year. If the research is performed outside of the country that amortization period is 15 years. Unfortunately, New Jersey and Delaware comply with the federal rules. Pennsylvania complies with federal law but the calculation is more complicated for calculating personal income taxes.

“The change was a big surprise to some of our clients,” said Mitch Gerstein, a senior tax advisor at Isdaner & Co. in Bala Cynwyd. “And it has a big impact. Because of this change, on $1 million of R&D expenditures only 10% or $100,000 will now be tax deductible and taxable income will increase by $900,000.”

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