McCrate, DeLaet & Co., CPA's

If you have a child or grandchild planning to attend college, you may wonder about investing in a qualified tuition program or 529 plan. You don’t get a federal tax deduction for contributions, but the earnings aren’t taxed while the funds are in the program. (There may be a state deduction in your state.) You can change the beneficiary without income tax consequences. Distributions are tax-free up to the amount of the qualified higher education expenses. These include tuition (up to $10,000 for an elementary or secondary public school), fees, books, supplies and required equipment. Room and board are also qualified expenses if enrolled at least half time. Contact us to learn more.

The IRS has announced inflation adjustments for 2025. The 2025 standard deduction for single taxpayers and married individuals filing separately will be $15,000, an increase of $400 from 2024. For married joint filers, it will be $30,000, an increase of $800 from 2024. For heads of households, the standard deduction will be $22,500, an increase of $600 from 2024. For 2025, the alternative minimum tax exemption amount for unmarried individuals will increase to $88,100 ($68,650 for married filing separately) and begin to phase out at $626,350. For married joint filers, the exemption will increase to $137,000 and begin to phase out at $1,252,700. For more details: https://bit.ly/3BRotmN

Does your business own real estate titled under the business’s name? With long-term tax, liability and estate planning advantages, separating real estate ownership from the business may be a better choice. For example, C corporations treat real estate like other business assets. Expenses related to owning the assets are generally tax deductible in the year incurred. However, when the business sells real estate, the profits are taxed twice, at the corporate level and at the owner’s individual level when a distribution is made. But if the real estate ownership is transferred to a pass-through entity instead, the sale profit will be taxed only at the individual level. Contact us to learn more.

It’s common for individual and business taxpayers to lose financial records during a natural disaster. Unfortunately, you usually need such records to document losses for your insurance company and to qualify for federal assistance. But if you visit the IRS’s website (https://bit.ly/4dQ3XA7), you can view or obtain copies of your historical tax returns, wage and income statements, and other tax account information. Requesting online access to your records is the fastest method, but even physical transcripts can be expected to arrive in the mail within 10 calendar days. Call your bank, credit card issuers and other financial service providers for copies of other needed documents.

The Social Security Administration (SSA) has announced that for 2025 the maximum earnings subject to Social Security tax will increase $7,500, from $168,600 to $176,100. This is referred to as the “wage base.” In addition, the SSA announced that Social Security and Supplemental Security Income (SSI) benefits will increase by 2.5%. These changes reflect cost-of-living adjustments based on inflation. On average, Social Security retirement benefits will increase by about $50 per month starting in Jan. 2025 for nearly 68 million recipients. Increased payments to nearly 7.5 million people receiving SSI will begin on Dec 31, 2024. (Note: Some people receive both Social Security benefits and SSI.)

Few estate planning subjects are as misunderstood as probate. Its biggest downside is the fact that probate is public. It’s predicated on state law, so the exact process varies from state to state. This has led to misconceptions about the length of probate. On average, the process takes no more than six to nine months, but it can run longer under certain situations. In basic terms, probate is the process of settling an estate and passing legal title of ownership of assets to heirs. If the deceased person has a valid will, probate begins when the executor named in the will presents the document in the county courthouse. Contact us for additional details on the probate process.

In recognition of Breast Cancer Awareness Month, McCrate, DeLaet & Co. is honored to participate in "We Choose Hope" Fridays in support of our colleague and friend Brenda Barhorst. Brenda, your strength is truly inspiring, thank you for allowing us to honor you!

Here are some important fourth quarter 2024 tax-filing dates for businesses. OCT 15: If you’re the owner or operator of a calendar-year C corp. which filed an extension, file a 2023 income tax return. OCT 31: Report income tax withholding and FICA taxes for Q3 2024 (unless you’re eligible for a Nov. 12 deadline because you deposited on time, and in full, all the associated taxes due). DEC 16: If a calendar-year C corp., pay the fourth installment of 2024 estimated income taxes. Note: Certain deadlines may be postponed in federally declared disaster areas. We can provide more information about filing requirements and ensure you’re meeting all applicable deadlines.

It’s an ideal time to begin making moves that could reduce your tax bills for 2024 and 2025. If you itemize deductions, you may be able to deduct medical expenses, state and local taxes up to $10,000, charitable donations, and eligible mortgage interest. But these deductions won’t save taxes unless they’re more than your standard deduction ($29,200 for joint filers, $14,600 for singles and $21,900 for heads of household). You may be able to work around deduction limits by bunching discretionary medical expenses and charitable gifts into the year they’ll do some tax good. For example, if you itemize for 2024 but not 2025, you may want to make two years of charitable contributions this year.

When drafting partnership agreements, various tax issues must be addressed. This is also true for operating agreements for multi-member LLCs that are treated as partnerships for tax purposes. For example, you should identify and describe guaranteed payments to partners because special tax rules apply to them. For income tax purposes, a guaranteed payment is one that’s: 1) made to a partner acting in the capacity of a partner, 2) made in exchange for services performed for the entity or for the use of capital by the partnership, and 3) not dependent on partnership income. Contact us to be involved in launching an entity and addressing tax issues in the partnership or LLC operating agreement.