January 2024 Tax News Update
Craig Carlini, CPA
ccarlini@rubino.com
David Albert, CPA dalbert@rubino.com
Robert Tempchin, CPA rtempchin@rubino.com
Lisa Hahn, CPA lhahn@rubino.com
Vikita Shah, EA vshah@rubino.com
Call us
301.564.3636
Federal Tax Updates
Corporate Transparency Act — Beneficial Ownership Information Reporting
As of January 1, 2024, The FinCEN Corporate Transparency Act (“CTA”) requires qualifying companies to file a federal report to identify their beneficial owners.
What entities are subject to the new CTA reporting requirements? Any corporations, limited liability companies (LLCs), and other entities that are created by a filing a formation document with a state agency must file a report. The CTA also applies to non-U.S. companies that register to do business in the U.S. through a filing with a Secretary of State or equivalent official.
There are a number of exceptions to who is required to file under the CTA. One such exception is for “large operating companies” defined as companies that meet all of the following requirements:
- Employ at least 20 full-time employees in the U.S.
- Report gross revenue (or sales) over $5 million on the prior year’s tax return
- Maintain an operating presence at a physical office in the U.S.
Reporting requirements (as currently promulgated):
- All new Reporting Companies — those formed (or, in the case of non-U.S. companies, registered) on or after January 1, 2024 — must report required information within 90 days after their formation or registration.
- All existing Reporting Companies — those formed or registered before January 1, 2024 — must report required information no later than January 1, 2025.
For additional information refer to FinCEN’s Frequently Asked Questions document.
The above is provided for informational purposes only. The reporting process and requirements remain subject to change as the government releases additional guidance.
If you have any questions, please contact your attorney or CPA.
The Secure 2.0 Act
The Secure 2.0 Act encourages employers and employees to establish and participate in retirement plans and offers exciting opportunities to improve retirement goals. From automatic enrollment to increased contribution limits, the Act will benefit millions of taxpayers. Although certain provisions of the Act will not be effective until later years, planning now for the changes could allow increased tax deferrals and savings.
Younger taxpayers could benefit from the increased “saver’s match” and mature taxpayers will benefit from the increased “catch-up” contribution limits. There are also provisions for retirement withdrawals for emergency expenses and illnesses which will allow more flexibility for unanticipated events. In addition, there are also planning opportunities for making charitable contributions with pre-tax money, and new rules for plan participation by military spouses. The Act is comprehensive and provides most taxpayers with valuable benefits.
Highlights of the SECURE 2.0 Act include:
- Higher 401(k) Catch-up Contributions
- Automatic Enrollment Changes
- Emergency Withdrawal Flexibility
- 529 Plan Roth Rollovers
- Student Loan Payment 401(k) Match
- New and enhanced credits for small businesses that sponsor plans
- Changes to RMD age requirement and penalties
- Retirement Savings Lost and Found
IRS released Q&A guidance on Key Secure 2.0 Act of 2022 Notice 2024-2
Tax Season Ready-Individual and Business Highlights
Individual Highlights:
Increase in Standard deduction rates:
| The standard deduction amounts for tax year | 2022 | 2023 | 2024 |
|---|---|---|---|
| single or married filing separately | $12,950 | $13,850 | $14,600 |
| married filing jointly or qualifying surviving spouse | $25,900 | $27,700 | $29,200 |
| head of household | $19,400 | $20,800 | $21,900 |
Increase in Additional Child Tax Credit
The maximum additional child tax credit has increased to $1,600 for each qualifying child for 2023 and $1,700 for 2024.
Health Savings Account
The annual HSA contribution limits under Section 223(b)(2) for 2023:
- $3,850 for self-only coverage (up from $3,650 in 2022)
- $7,750 for family coverage (up from $7,300 in 2022)
The annual HSA contribution limits under Section 223(b)(2) for 2024:
- $4,150 for self-only coverage
- $8,300 for family coverage
Increase in required minimum distribution age.
If you reached age 72 in 2023, you should take your first RMD in 2024 but the distribution can be delayed until April 1, 2025. Note that delaying the distribution until April 1, 2025, will result in reporting two RMDs on your 2025 return.
Increase in Annual gift & estate tax exemption/exclusion:
| Tax Year | 2023 | 2024 |
|---|---|---|
| Gift & Estate Tax exemption | $12,920,000 | $13,610,000 |
| Annual Gift Tax Exclusion | $17,000 | $18,000 |
Business Highlights:
Deduction for business meals returns to 50% limit.
The temporary relief provided under the Consolidated Appropriations Act of 2021 allowing 100% deduction has expired. Most business meals are 50% deductible for 2023.
Bonus depreciation deduction falls to 80%
Under the Tax Cuts and Jobs Act (TCJA), the bonus percentage will decrease by 20 points each year for property placed in service after December 31, 2022, and before January 1, 2027. In 2023, businesses can write off up to 80% of the purchase price of an eligible asset placed into service in the calendar year; the remaining 20% can be depreciated.
| 2022 | 2023 | 2024 | |
|---|---|---|---|
| Section 179 Maximum Deduction | $1,080,000 | $1,160,000 | $1,220,000 |
| Phase-out threshold | $2,700,000 | $2,890,000 | $3,050,000 |
| Bonus Depreciation | 100% | 80% | 60% |
| Equipment | New and used for both | New and used for both | New and used for both |
Tax credit for retirement plan for employees
Businesses with up to 50 employees may be eligible to claim a tax credit for 100% of the cost of starting a retirement plan, up to $5,000. The business may also be able to claim credit for up to $1,000 in employer contributions to each employee’s plan.
Tax Credits – for clean vehicles purchased in 2023 or later
- Clean vehicle tax credit for personal use
- For new clean vehicles purchased in 2023 or later – A credit of up to $7,500 is available for a new plug-in electric vehicle (EV) or fuel cell vehicle (FCV) placed in service (delivery date) in 2023 and later, to qualified individuals, sole proprietors and other business entities-see link below.
For more information on how to qualify for the credit, specific requirements related to your purchase, adjusted gross income limitations (AGI) and more, visit IRS website on new clean vehicle credit.
- For used clean vehicles purchased in 2023 or later, a credit of up to $4,000 is available for purchase of pre-owned used electric vehicle (EV) or fuel cell vehicle (FCV) by qualified individuals only.
For more information on how to qualify for the credit, specific requirements related to your purchase, adjusted gross income limitations (AGI) and more, visit IRS website on used clean vehicle credit.
- Commercial clean vehicle credit for business use
Two credits are available for vehicles purchased or leased for business use, for qualified sole proprietors and other business entities, credit and eligibility requirements as mentioned in 1(a) above applies.
For other qualified businesses and tax-exempt organizations, Commercial clean vehicle credit under IRC 45W is available for the purchase of a new qualified vehicle.
For more information and details, visit IRS Commercial Clean Vehicle Credit website and the IRS Guidance on the Incremental Cost for the Commercial Clean Vehicle Credit.
Did you know these tax credits, and more are available for Maryland taxpayers?
Individual tax credits:
- Credits for income taxes paid to other states.
- Credit for child and dependent care expenses.
- Quality teacher incentive credit.
- Long-term care insurance credit.
- Credit for preservation and conservation easements.
- Community investment tax credit.
- Endow Maryland tax credit.
- Independent living tax credit.
Business tax credits:
- Maryland disability employment tax credit.
- Businesses that create new jobs tax credit.
- First year leasing costs tax credit for qualified small businesses.
- Research and development tax credit.
- Commuter tax credit.
- One Maryland economic development tax credit.
- Cybersecurity incentive tax credit.
- Apprentice employee tax credit.
- Local income tax and local credits.
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