The 2023 tax return for entrepreneurs
Tax returns for the year 2023 must be filed with the IRS by May 1, 2024. Do you want to request a postponement? Then do so before May 1. Are you unsure if you need to file your income tax return as an entrepreneur? Then do the check.
In this article we list a number of important deductions and regulations for you. This way you will be well prepared for your tax return.
Entrepreneur Deduction
Are you an entrepreneur according to the Internal Revenue Service's criteria and have worked at least 1,225 hours on your business by 2023? Then you qualify for the entrepreneur deduction. The term says it all; this is a special deduction for entrepreneurs. This item consists of several components.
- Self-employment deduction: this is a fixed amount that self-employed people may deduct from their profits. In 2023, the self-employment deduction is €5,030. The benefit is calculated using a rate of 36.93 percent.
- Start-up deduction: this is an increase in the self-employment deduction for start-ups. You can use this arrangement three times in your first five years as an entrepreneur.
- Deduction for research and development work: this is a deduction for research work in innovation. You need a statement from the RFO for this.
- Co-work deduction: this scheme is for entrepreneurs whose tax partner collaborates in the business. To qualify for this scheme, the partner must work at least 525 hours in the business and be paid less than €5,000 per year for this.
- Cessation deduction: an amount you may deduct from cessation profits when you quit your business.
SME profit exemption
The SME exemption allows SMEs to deduct an additional 14 percent of profits after the entrepreneurial deduction. In 2023, the maximum deduction rate will be 36.93 percent.
Cost deduction for mixed costs
As an entrepreneur, you often incur various expenses, such as business gifts, business dinners or conferences. Such expenses fall under mixed costs. You can claim these expenses as a deduction, provided the amount is above €5,100.
Don't reach that amount? Then you can also choose to deduct 80 percent of the mixed costs.
Investment deduction and depreciation
The small-scale investment deduction allows you to deduct an amount from your profits. You can make use of this scheme if in 2023 you have invested more than € 2,600. Each asset must be an investment of more than € 450. For larger investments, other rules apply, check the site of the tax authorities.
In addition to these regulations, you can depreciate the cost of business assets over a certain number of years. This means that you can deduct a portion of the cost from profits each year.
Business capital
The balance in your business bank account belongs to your business. The money needed as working capital or for an investment does not count toward your assets in Box 3. The rest of the money, however, is considered capital.
Surcharges
You can apply for various benefits, for example for your rent, health care costs or child care. In most cases, your assets also count towards these allowances. If you can make use of one or more schemes for entrepreneurs, your qualifying income is often lower. This means that you are more likely to qualify for an allowance. On the site of the tax authorities you can find everything about the available benefits and the conditions.
Every situation is unique. Therefore, it is important to always check carefully which rules apply to your situation. You can look at the Tax Office's site for this or seek professional advice.
