First-year bonus depreciation isn’t as valuable in 2024.
Last year, businesses could deduct 80% of the cost of new and used qualifying business assets with lives of 20 years or less. This year, the 80% write-off decreases to 60%. But expensing is higher. $1,220,000 of assets can be expensed in 2024. This limit phases out dollar for dollar once more than $3,050,000 of assets are put into use in 2024. Note that the amount of business assets expensed can’t exceed the business’s taxable income. Bonus depreciation doesn’t have this rule.
A key dollar threshold on the 20% deduction for pass-through income rises in 2024.
Self-employeds and owners of LLCs, S corporations and other pass-throughs can deduct 20% of their qualified business income, subject to limitations for individuals with taxable incomes of more than $383,900 for joint filers and $191,950 for all others.
More companies can use the cash method of accounting.
For taxable years beginning in 2024, C corporations with average annual gross receipts of $30 million or less over the previous three years can use the cash method. This threshold also applies to partnerships and LLCs that have C corporations as owners.
The 2024 standard mileage rate for business driving is 67 cents per mile.
The mileage allowance for medical travel and military moves is 21 cents per mile in 2024. The charitable driving rate is fixed by law and stays put at 14 cents a mile
Certain clean-energy credits in the Inflation Reduction Act can be monetized.
Businesses may elect to transfer 11 of the credits to unrelated third parties for cash. State and local government and their instrumentalities and tax-exempt organizations can elect to treat 12 of the energy-savings credits as a payment of federal income tax and receive an income tax refund for the amount that exceeds any taxes they owe.
A new beneficial ownership reporting regime for small firms begins in 2024.
It’s run by the Financial Crimes Enforcement Network. Certain corporations, LLCs and other entities must report information about themselves and their beneficial owners to FinCEN. There are lots of exceptions to reporting, including one for operating firms with over 20 full-timers, over $5 million in gross receipts, and a U.S. physical office. Entities in existence before 2024 have until Dec. 31, 2024, to file their report. Entities formed after 2023 have 90 days after the date of formation to comply. Reporting will be done electronically through FinCEN’s website. Although this isn’t a tax rule, businesses and tax professionals should be aware of it.
As always, we’ll report on tax changes from IRS, Congress and the courts… and how you’ll be affected. And in an election year, we’ll delve further into the tax plans of the leading candidates for president. 2024 promises to be a very interesting year.