New SALT Limit

[kathyc2]

I think the qualified auto interest can only be deductible on a auto purchase after 12/31/2024. If the TP refinances I think the provision doesn't allow any extra funds to be taken out for deduction purposes. Sounds similar to the refinancing of existing mortgage acquisition interest.

The way I read it is the loan needs to be taken out after 12/31/24, not that the purchase needs to be after that date.

(i) IN GENERAL.—For purposes of this paragraph, the term ‘qualified passenger vehicle loan interest’ means any interest which is paid or accrued during the taxable year on indebtedness incurred by the taxpayer after December 31, 2024, for the purchase of, and that is secured by a first lien on, an applicable passenger vehicle for personal use.

Also:

(ii) TREATMENT OF REFINANCING.—Indebtedness described in subparagraph (B) shall include indebtedness that results from refinancing any indebtedness described in such subparagraph, and that is secured by a first lien on the applicable passenger vehicle with respect to which the refinanced indebtedness was incurred, but only to the extent the amount of such resulting indebtedness does not exceed the amount of such refinanced indebtedness.

[rbynaker]

I think the qualified auto interest can only be deductible on a auto purchase after 12/31/2024. If the TP refinances I think the provision doesn't allow any extra funds to be taken out for deduction purposes. Sounds similar to the refinancing of existing mortgage acquisition interest.

I agree with Frank. The refinancing section refers back to subparagraph (B) where the original debt must be incurred after 12/31/24. Other things I noted, must be a new car ("original use commences with the taxpayer"), personal use only, <14,000 lbs, street legal, not a salvage or "spare parts" vehicle, and the IRS will provide us a place to include the VIN as part of the tax return. Also the loan cannot be from a related party. Limit is $10K/year and phase out begins at $100K ($200K MFJ). Phase out effectively ends at $150K / $250K MFJ (or earlier if interest <$10K cap).

Like the other above-the-line** deductions, this one expires at the end of 2028 (hmm, isn't that an election year?)

Rick

** When I learned "above-the-line" it was used to describe items deducted before arriving at AGI. Now it's seemingly morphed into deductions after AGI but still outside of Itemized deductions.

[TaxGuyBill]

** When I learned "above-the-line" it was used to describe items deducted before arriving at AGI. Now it's seemingly morphed into deductions after AGI but still outside of Itemized deductions.

I think pre-AGI is still the definition, but too many media stories and blogs are misusing the phrase.

[rbynaker]

Rick - this cut doesn’t interfere with the non-itemizer charitable deduction- is that correct?

Correct. It took me a few hops to follow the law through back to the code. The new reading of 170(p) [non-itemizer deduction] will include "determined without regard to subsections (b)(1)(G)(ii), (b)(1)(I) [new 0.5% floor], and (d)(1)".

Rick

PS: This is confusing enough that I'm throwing a summary together here to try to keep track of what's 2025 and what's 2026:

https://docs.google.com/spreadsheets/d/11UgdhpHU_HyHCm8rhJ_t2awYRiKg_US20B1FH7uTj0U/edit?usp=sharing

Not to be relied upon as tax advice, unverified, unreviewed, proceed at your own peril, etc. ;-)

[kathyc2]

I agree with Frank. The refinancing section refers back to subparagraph (B) where the original debt must be incurred after 12/31/24. Other things I noted, must be a new car ("original use commences with the taxpayer"), personal use only, <14,000 lbs, street legal, not a salvage or "spare parts" vehicle, and the IRS will provide us a place to include the VIN as part of the tax return. Also the loan cannot be from a related party. Limit is $10K/year and phase out begins at $100K ($200K MFJ). Phase out effectively ends at $150K / $250K MFJ (or earlier if interest <$10K cap).

Like the other above-the-line** deductions, this one expires at the end of 2028 (hmm, isn't that an election year?)

Rick

** When I learned "above-the-line" it was used to describe items deducted before arriving at AGI. Now it's seemingly morphed into deductions after AGI but still outside of Itemized deductions.

Yeah, I think you are correct that it needs to be a new vehicle purchased after 12/31/24.

Above the line will always mean before AGI in my language.

Remember in 2017 when they were so proud of the "simplification" and "post card" return? This debacle is going to add several lines and forms.

[kathyc2]

Correct. It took me a few hops to follow the law through back to the code. The new reading of 170(p) [non-itemizer deduction] will include "determined without regard to subsections (b)(1)(G)(ii), (b)(1)(I) [new 0.5% floor], and (d)(1)".

Rick

PS: This is confusing enough that I'm throwing a summary together here to try to keep track of what's 2025 and what's 2026:

https://docs.google.com/spreadsheets/d/11UgdhpHU_HyHCm8rhJ_t2awYRiKg_US20B1FH7uTj0U/edit?usp=sharing

Not to be relied upon as tax advice, unverified, unreviewed, proceed at your own peril, etc. ;-)

That sheet is the bomb-diggity!

Question on savers credit. Does this: COORDINATION WITH SECURE 2.0 ACT OF 2022 AMENDMENT.—Paragraph (1) of section 103(e) of the SECURE 2.0 Act of 2022 is repealed, and the Internal Revenue Code of 1986 shall be applied and administered as though such paragraph were never enacted. mean that the Savers Credit will continue to act like it had been as an offset credit and not required to be put in IRA (the credit)?

[rbynaker]

That sheet is the bomb-diggity!

Question on savers credit. Does this: COORDINATION WITH SECURE 2.0 ACT OF 2022 AMENDMENT.—Paragraph (1) of section 103(e) of the SECURE 2.0 Act of 2022 is repealed, and the Internal Revenue Code of 1986 shall be applied and administered as though such paragraph were never enacted. mean that the Savers Credit will continue to act like it had been as an offset credit and not required to be put in IRA (the credit)?

I'm weak on that. I learned the SECURE 2.0 rules [modifying the Saver's Credit] and they were so convoluted that nothing "stuck" in my brain. I also have 0 clients who qualify so I figured either I would look it up if/when it became relevant or at some point someone in power would realize the rules are too complicated to help anyone who actually makes so little that they qualify for them.

That said, Sec 103(e)(1) of SECURE 2.0 (NOTE this is not a reference to an IRC section, merely a section in a different law that I had to go dig up!) reads:

(e) CONFORMING AMENDMENTS.—
(1) Paragraph (1) of section 25B(d) is amended by striking ‘‘the sum of—’’ and all that follows through ‘‘the amount of contributions made before January 1, 2026’’ and inserting ‘‘the amount of contributions made before January 1, 2026’’.

So that leads us back to unstriking parts of 25B(d) that were not scheduled to be stricken until 1/1/27. I honestly have no idea what that means (and that can likely wait until 2026 CPE unless this nonsense throws me into early retirement!)

Rick

[TaxGuyBill]

Thanks for the spreadsheet Rick.

I am going to 'vent' my annoyance at one part of the new law: The 100% Bonus Depreciation (Section 70301) doesn't start until after January 19th, 2025. REALLY!? It probably has to do with some bizarre congressional rule, but it drives me crazy when they have split-year things like that.

[rbynaker]

Thanks for the spreadsheet Rick.

I am going to 'vent' my annoyance at one part of the new law: The 100% Bonus Depreciation (Section 70301) doesn't start until after January 19th, 2025. REALLY!? It probably has to do with some bizarre congressional rule, but it drives me crazy when they have split-year things like that.

That smelled purely political to me. i.e. Only equipment purchased after the inauguration qualifies . . .

I didn't dig into business provisions too deeply yet (just read a few summary articles). And I haven't slogged through the section on Trump Accounts. I can't spend my entire holiday weekend reading tax laws. ;-)

Hopefully TTB will come up with something I can digest (which reminds me, time to place my order for next year before the discount expires--definitely need to add the What's New Supplements to the order this year!)

[TaxGuyBill]

That smelled purely political to me. i.e. Only equipment purchased after the inauguration qualifies . . .

Oh my. I didn't think of that. I bet you are right.

This political system is completely broken. I'm not pointing fingers at the current political party in power; both parties are guilty and the entire system is broken.

[New York Enrolled Agent]

Kathy and others - I'm coming back to my post from yesterday regarding the OT pay. - I've been struggling with this. Someone posted a similar example on a different board and that made me look again and I now think the $150 is fully excludable.

I believe the problem arises with the "regular rate". At first glance it seems to cover the $20/hour (regular hourly pay) in my example. But I think "regular rate" needs to be viewed based on the Fair Labor Act, section 7. In that section, subsection 207(e) defines regular rate. If I read it correctly, the regular rate in my example would be $800 (40 hours times $20). Thus, the OT pay to be excluded would be $150.

Obviously, I may be interpreting incorrectly but take a look at the definition and see what you think. This is only a snip from 207(e) - a snip can be dangerous so maybe look at the whole thing. BTW, 207(a) defines overtime to be in excess of 40 hours.

(e) “Regular rate” defined
As used in this section the “regular rate” at which an employee is employed shall be deemed to include all remuneration for employment paid to, or on behalf of, the employee, but shall not be deemed to include—

[TaxGuyBill]

If you look at ?207(a), you'll see that overtime pays "one and one-half times the regular rate". Using your example, if your "regular rate" was $800, overtime doesn't mean you are suddenly receive an extra $400.

I believe that "All remuneration" just means to include non-cash benefits/payments that are part of their pay. For example, the definition of "wages" in IRC ?3121(a) ties "all remuneration" to non-cash benefits.

[New York Enrolled Agent]

If you look at ?207(a), you'll see that overtime pays "one and one-half times the regular rate". Using your example, if your "regular rate" was $800, overtime doesn't mean you are suddenly receive an extra $400.

I believe that "All remuneration" just means to include non-cash benefits/payments that are part of their pay. For example, the definition of "wages" in IRC ?3121(a) ties "all remuneration" to non-cash benefits.

TGB - you’re usually correct so I’m not saying you’re wrong but let me be devil’s advocate on this. To determine the correct OT rate it is necessary for the employer to calculate the “regular rate” as defined in 207(e) and then divide by 40. That subsection says for example “regular rate” would not include extra money for working on a Sunday.

So if the TP has $800 in total remuneration (regular rate as defined) then his/her regular rate of pay is $20 per hour and the OT rate can be no less than $30 per hour. TP works 5 hours of OT for a total of $150. What’s the excess of remuneration over the regular rate as defined? Still seems like $150.

I certainly can be wrong but I think that’s what our leaders ( loosely used ) intended. Look forward to IRS confirmation one way or other.

[rbynaker]

This is going to be a mess for small employers. If the accountants in the room can't figure this out, how is Sally SmallBusinessOwner going to know what to report on the W-2?

Going a step further, as tax preparers are we just accepting whatever shows up on the W-2? Earlier in my career I would often see W-2 errors related to equity compensation. When HSAs became popular I would frequently have at least one client per year with a W-2 that was clearly incorrect. For those I would inform the client to push back on the employer to get a correction. I'm not sure I have enough information to know if a W-2 reporting OT is right or wrong. I still get year-end paystubs for clients with equity compensation (mostly to look for breadcrumbs that lead to a 1099-B they didn't tell me about), do I need to start getting paystubs for anyone with overtime? (Or do I just retire now and let this be somebody else's problem?)

[TaxGuyBill]

“regular rate” as defined in 207(e) and then divide by 40.

So if the TP has $800 in total remuneration (regular rate as defined)


then his/her regular rate of pay is $20 per hour .

I guess I still read it as the "rate" is $20 per hour, not $800 a week.

That section says the "rate" for overtime is 1.5 times the regular rate. As you pointed out, the section also refers to a "premium rate" for Sundays, holidays, etc.

To me, "rate" is referring to an hourly amount, which is $20 an hour. The new law makes the "excess" of $20 per hour qualify for a deduction. To me, that is $10 per hour.

But as you said, it will be nice to read guidance from the IRS/Treasury.