Clean Energy Tax Credits: Understanding the Tax Aspects. Starting January 1, 2024, taxpayers who purchase qualifying clean energy vehicles can transfer their tax credits to the dealer at the time of sale to reduce the vehicle's cost. The IRS has now provided guidance on how these elective transfers will impact tax liability for both taxpayers and dealers. The short answer is: they won't. The amounts received by the buyer (whether in cash or in the form of a down payment) are not included in the buyer’s income. The amounts are simply treated as an advance payment of the allowable tax credit. However, the basis of the vehicle must be reduced by the amount of the advance credit. The advance payment of the credit is not included in the dealer's income, but the dealer also cannot deduct the amount transferred. The amounts are treated as though the buyer paid the amounts to the dealer as part of the purchase price of the vehicle and will be realized by the dealer in the same way as any other method of purchase. For more information on the Inflation Reduction Act's green energy tax credits, visit Tax Facts Online. Link here to Tax Facts Online
Are Your Clients Ready for the SECURE Act Long-Term, Part-Time Eligibility Effective Date? When the original SECURE Act was enacted, it changed the rules to allow long-term, part-time employees to begin participating in retirement plans. Under the new law, employees who perform at least 500 hours of service for at least three consecutive years (and are at least 21 years old) also must be allowed to participate in the employer-sponsored 401(k). These long-term, part-time employees may, however, be excluded from coverage and nondiscrimination testing requirements. Plan sponsors were required to start counting and tracking part-time employee hours beginning January 1, 2021, so part-time employees may be eligible to make employee deferrals as of January 1, 2024. However, for plan years beginning after 2024, the three-year period is reduced to two years under SECURE 2.0, meaning that employees with at least 500 hours of service for at least two years must be allowed to participate starting in 2025 (for SECURE 2.0 purposes, plan years starting before January 1, 2023 are not counted). For more information on retirement plan eligibility rules, visit Tax Facts Online. Link here to Tax Facts Online
Social Security Administration Announces COLA Adjustments for 2024. The Social Security Administration (SSA) announced a significantly lower increase for the 2024 Social Security cost-of-living adjustment (COLA), at 3.2% (by contrast, the 2023 Social Security COLA was 8.7%). Working taxpayers will also have to pay Social Security taxes on a higher percentage of their income for 2024. The Social Security wage base--the amount of wages subject to Social Security taxes--is set to increase from $160,200 to $168,600 in 2024 (meaning that wages in excess of $168,600 will be exempt from Social Security taxes). Social Security and SSI recipients should expect to receive information about their new benefit amount by mail beginning in early December. Individuals with a mySocialSecurity account can also view information about their COLA increases online. For more information on the Social Security wage base, visit Tax Facts Online. Link here to Tax Facts Online
