Federal Tax Law Changes

Jan 4, 2024 | Uncategorized

Each year the IRS publishes Publication 225, A Farmer’s Tax Guide

This guide explains how the federal tax laws apply to farming and can be used to help figure your taxes and complete your farm tax return.

Here’s a summary of the changes seen in 2023 and the upcoming changes for 2024:

For Tax Year 2023

  1. Standard Mileage Rate: The business standard mileage rate has increased to 65.5 cents per business mile.
  2. Section 179 Expense Deduction: The maximum deduction for most section 179 property is $1,160,000. This limit reduces if the cost of property placed in service exceeds $2,890,000. For sport utility vehicles, the limit is $28,900.
  3. Special Depreciation Allowance: The allowance is 80% for certain qualified property acquired after September 27, 2017, and placed in service after December 31, 2022, and before January 1, 2024. This includes specified plants bearing fruits and nuts.
  4. Maximum Net Earnings: The maximum net self-employment earnings subject to the social security part of the tax is $160,200.
  5. 2023 Withholding Tables: These are now included in Pub. 15-T.
  6. Business Meals Deduction: The 100% deduction for food or beverages provided by a restaurant expired, reverting to 50% starting January 1, 2023.
  7. Qualified Small Business Payroll Tax Credit for Increasing Research Activities: Increased to $500,000 for tax years beginning after December 31, 2022.
  8. Credit for COBRA Premium Assistance Payments: Lines for this credit on Form 943 have been reserved for future use, as the eligible period ended on September 30, 2021.
  9. Publication 51 Discontinued: Information specific to agricultural employers will be in Pub. 15 from 2024.
  10. Social Security and Medicare Tax: The social security tax rate and Medicare tax rate remain unchanged, with the social security wage base limit at $160,200.

For Tax Year 2024

  1. Phase Down of Special Depreciation Allowance: The allowance is reduced to 60% for certain qualified property (80% for property with a long production period and certain aircraft).
  2. Social Security and Medicare Tax for 2024: Details will be provided in Pub. 15 for use in 2024.

These changes reflect adjustments in tax rates, allowances, and deductions, aimed at adapting to economic conditions and policy shifts. It’s important for farmers to be aware of these changes to ensure compliance and optimal tax planning.

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