The landscape of tax regulations is ever-shifting. Significant modifications are on the horizon for the upcoming tax year in 2024 when filing tax return in 2025. Notable adjustments, such as revisions to the standard deduction and tax brackets, will introduce fresh limits and thresholds. These modifications are set to impact income generated in 2025, ultimately reflecting on tax filings for the year 2026.
Major Changes For Filing the 2024 Tax Return in 2025
A variety of tax incentives are available to those interested in acquiring eco-friendly vehicles. These incentives include tax credits for the acquisition of plug-in electric and fuel-cell vehicles. These credits encompass a new clean vehicle credit, a pre-owned clean vehicle credit, and a commercial clean vehicle credit, each with specific criteria and credit thresholds.
In the upcoming tax year of 2024, there are notable adjustments to be aware of regarding tax credits that were initially implemented in 2023. A fresh feature introduced for the year ahead allows individuals to exchange these credits with the dealer for a purchase made in 2024 and necessitates the inclusion of extra details in the reporting process.
When it comes to credit transferability within green energy incentives, some tax credits are transferrable for monetary value. An excellent illustration is the credit for alternative fuel refueling property, which involves setting up charging stations and then selling the credit to gain immediate cash. The IRS FAQs provide clarity on the necessary steps to facilitate these transfers.
In the event that pass-through entity owners incur losses in the year 2024, they potentially qualify for a deduction known as a net operating loss (NOL) when filing their individual tax return. A recently introduced tax form, Tax Form 172, specifically for Net Operating Losses (NOLs), has been created to accommodate this situation.
Adjustments for Inflation for Tax Return in 2025
Each year, the IRS makes various adjustments to tax items to account for inflation. One notable change is the adjustment of tax brackets for individuals, which directly influences the amount owners of pass-through entities contribute towards their share of business income.
Some other items affecting businesses due to cost of living adjustments (COLAs) include:
Standard Mileage Rate From Driving for Business.
Exploring the impact of the cost of living adjustments (COLAs) on businesses reveals a variety of factors, one of which is the Standard mileage rate for business driving. In the absence of deducting actual expenses, the rate set by the IRS amounts to 67¢ per mile for the year 2024.
Health Insurance Credit for Small Businesses and Employers.
Within the realm of business impacts related to cost of living adjustments (COLAs), another noteworthy factor to consider is the Small employer’s health insurance credit. This credit’s eligibility criteria, which takes wage levels into account, has recently been updated to reflect inflation rates for the year 2024.
Gross Receipts when Filing Tax Return in 2025
Test for annual gross receipts. A crucial assessment to determine a business’s eligibility for employing the cash method of accounting, opting out of inventory accounting, and meeting other specific criteria. For the fiscal year 2024, the benchmark under the annual gross receipts test stands at an average of $30 million over the preceding three years.
First Year Expensing
Beginning in 2024, the Sec. 179 tax deduction offers businesses the opportunity to deduct the full cost of eligible property, such as machinery and equipment, when placed in service. This deduction allows for an immediate expensing of up to $1,220,000, with a reduction for purchases exceeding $3,050,000.
Retirement Plan Contributions.
In addition to the impact of cost of living adjustments (COLAs), there are several other factors that influence businesses, such as contributions to retirement plans. The limits for qualified retirement plan contributions have been raised for the year 2024.
Limitation on Losses for Non-Corporate Taxpayers.
Among the factors influencing businesses as a result of adjustments in the cost of living, there is the consideration of limitations on losses for non-corporate taxpayers. The current restriction on losses for the year has been raised, with any surplus losses being integrated into a net operating loss that may be utilized in upcoming years.
QBI (Qualified business income) Tax Deduction.
In addition to the cost of living adjustments (COLAs), businesses are impacted by various factors, such as the Qualified Business Income (QBI) tax deduction. For the tax year 2024, the threshold for taxable income at which the QBI deduction may be restricted or excluded has been raised.
