Mark R. Stanhope CPA PC

Enhanced SALT Tax Break Will Help Many Homeowners
The One Big Beautiful Bill Act (OBBBA), enacted on July 4, will allow more taxpayers to fully deduct their state and local tax (SALT) expenses (including property tax). Here are the details.

SALT Deduction Expanded
Under the Tax Cuts and Jobs Act, the itemized deduction for SALT was limited to $10,000 ($5,000 for married individuals who file separately) beginning in 2018.

This limitation negatively affected taxpayers living in locations with high state income tax rates and those who pay high property taxes because:

They live in a high-property-tax jurisdiction,
They live in a location with high property values,
They own an expensive home, or
They own both a primary residence and one or more vacation homes.
Under the OBBBA, for 2025 through 2029, the SALT deduction limit increases from $10,000 to $40,000 (or $20,000 for separate filers) with 1% annual inflation adjustments. So, for 2026, the cap will be $40,400 ($20,200 for separate filers).

But unless Congress takes further action, the SALT deduction limit is scheduled to revert to the prior-law limit of $10,000 ($5,000 for separate filers) in 2030.

Plan Your 2024 Retirement Contributions and Tax Tips:

As part of your planning for next year, now is the time to review funding your retirement accounts in 2024. Recent cost of living calculations mean much higher contribution limits for next year. The higher income phaseouts for eligibility will make many taxpayers eligible for fully-deductible contributions. So, you can take full advantage of this tax benefit.

First, here are the 2024 annual contribution limits for the more popular programs:

The contribution limit for employees who participate in 401(k), 403(b), and most 457 plans, as well as the federal government's Thrift Savings Plan, is increased to $23,000, up from $22,500.

The limit on annual contributions to an IRA increased to $7,000, up from $6,500. The IRA catch‑up contribution limit for individuals aged 50 and over was amended under the SECURE 2.0 Act of 2022 (SECURE 2.0) to include an annual cost‑of‑living adjustment but remains $1,000 for 2024.

The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), and most 457 plans, as well as the federal government's Thrift Savings Plan, remains $7,500 for 2024. Therefore, participants in 401(k), 403(b), most 457 plans, and the federal government's Thrift Savings Plan who are 50 and older can contribute up to $30,500 starting in 2024. The catch-up contribution limit for employees 50 and over participating in SIMPLE plans remains $3,500 for 2024.

In summary and a tax tip:
Identify the type(s) of retirement savings plans you currently use.
Note the annual savings limits of the plan to adjust your savings to take full advantage of the annual contributions. Remember, a missed year is a missed opportunity that does not return.
If you are 50 or older, add the catch-up amount to your potential savings total.

Take note of the income limits within each plan type? For traditional IRAs, if your income is below the noted threshold, your taxable income is reduced by your contributions. The deductibility of your contributions is also limited if your spouse has access to a plan.
In the case of Roth IRAs, the income limits restrict who can participate in the plan. Ask your accountant about back-door Roth IRAs.

If you have not already done so, also consider:
Setting up new accounts for a spouse or dependent(s)
You'll be able to use this time to review the status of your retirement plan, including beneficiaries.
Reviewing contributions to other tax-advantaged plans like Flexible Spending Accounts (health care and dependent care) and prepaid medical savings plans like Health Savings Accounts.

Unsure if you filed your 2022 or past returns correctly?

Haven't filed or need to resolve a tax problem?

We are offering free consultations for the month of July!

Call us at (978)568-9100 or submit an inquiry on our website

Mark R. Stanhope CPA, PC | Hudson, MA Mark R. Stanhope CPA, PC is a full service tax, accounting and business consulting firm that specializes in Tax Resolution Services with the IRS. We are located on Main Street in Hudson, MA.

Tax Rules for Divorce and Alimony Payments
Divorce is a painful reality for many people, both emotionally and financially. Quite often, the last thing on anyone's mind is the effect a divorce or separation will have on their tax situation. To make matters worse, most court decisions do not consider the effects divorce or separation has on your tax situation, which is why it's always a good idea to speak to an accounting professional before anything is finalized.

Furthermore, tax rules regarding divorce and separation can and do change - as they recently did under tax reform. Divorced and separated individuals should be aware of tax law changes that took effect in 2019.

Who is Impacted
The new rules relate to alimony or separate maintenance payments under a divorce or separation agreement and include all taxpayers with:

Divorce decrees.
Separate maintenance decrees.
Written separation agreements.
Tax reform did not change the tax treatment of child support payments that are not taxable to the recipient or deductible by the payor.
Timing of Agreements
Agreements executed beginning January 1, 2019, or later. Alimony or separate maintenance payments are not deductible from the income of the payor spouse, nor are they includable in the income of the receiving spouse if made under a divorce or separation agreement executed after December 31, 2018.

Agreements are executed on or before December 31, 2018, and then modified. The new law applies if the modification does these two things:

Changes the terms of the alimony or separate maintenance payments.
Specifically states that alimony or separate maintenance payments are not deductible by the payer spouse or includable in the income of the receiving spouse.
Agreements are executed on or before December 31, 2018. Before-tax reform, a taxpayer who made payments to a spouse or former spouse could deduct it on their tax return. The taxpayer who receives the payments is required to include them in their income. If an agreement was modified after that date, the agreement still follows the previous law as long as the modifications do not:

Change the terms of the alimony or separate maintenance payments.
Specifically state that alimony or separate maintenance payments are not deductible by the payer spouse or includable in the income of the receiving spouse.
Tax reform made an already complicated situation even more so. Don't hesitate to call if you have any questions about the tax rules surrounding divorce and separation.

Important Tax Changes for Businesses:

Standard Mileage Rates
In 2021, the rate for business miles driven is 56 cents per mile, down 1.5 cents from the rate for 2020.

Section 179 Expensing
In 2021, the Section 179 expense deduction increases to a maximum deduction of $1,050,000 of the first $2,620,000 of qualifying equipment placed in service during the current tax year. This amount is indexed to inflation for tax years after 2018. The deduction was enhanced under the TCJA to include improvements to nonresidential qualified real property such as roofs, fire protection, and alarm systems and security systems, and heating, ventilation, and air-conditioning systems. Also, of note is that costs associated with the purchase of any sport utility vehicle, treated as a Section 179 expense, cannot exceed $26,200.

Bonus Depreciation
Businesses are allowed to immediately deduct 100% of the cost of eligible property placed in service after September 27, 2017, and before January 1, 2023, after which it will be phased downward over a four-year period: 80% in 2023, 60% in 2024, 40% in 2025, 20% in 2026, and 0% in 2027 and years beyond.

Qualified Business Income Deduction
Eligible taxpayers are able to deduct up to 20 percent of certain business income from qualified domestic businesses, as well as certain dividends. To qualify for the deduction business income must not exceed a certain dollar amount. In 2021, these threshold amounts are $164,900 for single and head of household filers and $329,800 for married taxpayers filing joint returns.

Research & Development Tax Credit
Starting in 2018, businesses with less than $50 million in gross receipts can use this credit to offset alternative minimum tax. Certain start-up businesses that might not have any income tax liability will be able to offset payroll taxes with the credit as well.

Work Opportunity Tax Credit (WOTC)
Extended through 2025 (The Consolidated Appropriations Act, 2021), the Work Opportunity Tax Credit is available for employers who hire long-term unemployed individuals (unemployed for 27 weeks or more) and is generally equal to 40 percent of the first $6,000 of wages paid to a new hire.

Employee Health Insurance Expenses
For taxable years beginning in 2021, the dollar amount of average wages is $27,800 ($27,600 in 2020). This amount is used for limiting the small employer health insurance credit and for determining who is an eligible small employer for purposes of the credit.

Business Meals and Entertainment Expenses
Taxpayers who incur food and beverage expenses associated with operating a trade or business are able to deduct 100 percent (50 percent for tax years 2018-2020) of these expenses for tax years 2021 and 2022 (The Consolidated Appropriations Act, 2021) as long as the meal is provided by a restaurant.

Employer-provided Transportation Fringe Benefits
If you provide transportation fringe benefits to your employees in 2021, the maximum monthly limitation for transportation in a commuter highway vehicle as well as any transit pass is $270. The monthly limitation for qualified parking is $270.

While this checklist outlines important tax changes for 2021, additional changes in tax law are likely to arise during the year ahead. Don't hesitate to call if you have any questions or want to get a head start on tax planning for the year ahead.