NOTE: This content is for informational purposes only and should not be mistaken for any such information or other material as legal, tax, investment, financial, or other advice.

New 2023 business tax laws can change how you file your taxes and the ways you decide to classify employees in the future. Physical security companies should get to know these 2023 tax law changes to remain compliant with new regulations.

A 20% Deduction for Businesses

One of the first new tax laws for the 2023 filing season is a deduction opportunity. Beginning in 2023, pass-through owners can take advantage of a 20% business income deduction. This deduction applies to both domestic and foreign business income and is available for up to $182,100 of income.  

This deduction can help reduce the effective tax rate of physical security company owners. Changes like this make it easier to do things like reinvest and grow a business. Many businesses are eligible for this deduction and can benefit when filing taxes.

Minimum Payment for Business Privilege Tax

New 2023 tax laws introduced a reduced minimum payment for business privilege tax and an elimination of this payment in 2024. This change was made in Legislative Bill 432, which went into effect in 2021. This cut the minimum payment in half and will be eliminated entirely starting in 2024.  

This change gives relief to U.S. physical security companies and can help them save money on taxes. Be sure to check state tax laws for state-specific information.  

Required Minimum Distribution Age Increase

The SECURE 2.0 Act has brought in a new era for retirement planning. It raised the required minimum distribution age from 70 ½ to 73 for those born after June 30, 1949.

This is great news for those looking to maximize retirement savings and postpone their tax bill. The new age requirement is set to increase to 75 by 2033. Changes will give people more time to let their investments grow before withdrawing.

What does this mean for small businesses and physical security companies? That they can confidently plan knowing retirement plans are being taken seriously.

Standard Deduction Increase for Heads of Household

The standard deduction in 2023 for heads of households will increase by $1,400 to $20,800. This is an important change and can help reduce taxable income while saving taxpayers money.

Standard deduction increases can give big tax breaks for those filing as heads of households, making it even more important to understand all 2023 small business tax law changes. Communicate this to your team members to make sure they take advantage of this deduction.  

Income Tax Brackets Increase

Income tax brackets for single filers and married couples filing jointly are set to increase in 2023. The standard deduction will rise to $13,850, an increase of $900 for single taxpayers. The deduction will jump to $22,000 for married couples.  

This means that the first $11,000 of income will be taxed at 10%, with the next $33,725 at 12%, and the last $50,275 at 22%, a 2% increase from previous years. These tax bracket increases will also apply to heads of households, with standard deductions set to rise to $13,850.  

Such increases offer businesses and individuals the opportunity to reduce their 2023 tax burden. This can help with employee retention efforts as tax burdens loosen for employees and colleagues. Provide your team with resources that can empower them to better understand their tax bracket, maintain tax withholdings, and keep your business compliant.  

Capital Gains and Qualified Dividend Rates Increase

Capital gains and qualified dividends will be subject to an increased rate of taxation under new 2023 tax laws. One example? The Tax Policy Center found that the capital gains realization rate increased by 60% when the capital gains tax rate was increased from 20% to 28%. The 0% long-term capital gains tax rate is only applicable for those with taxable incomes of $44,625 or less for single filers and $89,250 or less for joint filers.

New 2023 tax laws may have a large impact on businesses and taxpayers alike. These changes can lead to an increase in taxation for those who invest in long-term capital gains or qualified dividends. Details like this are important to keep in mind if you own or run a private security firm.

Alternative Minimum Tax Increases

The Alternative Minimum Tax (AMT) will increase in 2023 with the implementation of the Corporate Alternative Minimum Tax (CAMT). This change imposes a 15% minimum tax on book income of corporations with adjusted financial statement income exceeding $1 billion. Taking effect in 2023, states such as New Jersey will also raise their excise tax on certain items. These changes will impact businesses and individuals alike - including physical security companies and their employees.

Self-Employment Tax Rate Increase

Self-employed individuals should pay attention to their taxes this year. The self-employment tax rate increased from 15.3% to 15.4% beginning Jan. 1, 2023. While this may not sound like much, it has an impact on one’s overall tax bill. The employee part of this tax is 7.65%, and the employer part is also 7.65%.  

Those who aren’t employees of a company, like contract security officers, must pay both portions of the tax themselves. It’s important for self-employed individuals to take full advantage of deductions and credits available and minimize tax burdens.

Tax Laws and Physical Security

Physical security business leaders are facing significant macroeconomic risks and need to adjust their strategies to capitalize on potential opportunities. New 2023 tax laws include an increase in the corporate income tax rate, a minimum 15% tax based on annual income, and a limit on the deduction for business interest paid.  

Other 2023 tax law changes include an increase in the standard deduction for heads of households, higher income tax brackets, capital gains, qualified dividend rates, alternative minimum tax increases, and self-employment tax rate increases. Security business owners should review these changes carefully and consult with a certified tax pro to make sure they’re making the best decisions for their bottom line.