To our Friends and Clients:
The following pages are to be treated as a highlight for items we think you might find important. There are links below many of the highlighted items if you are looking for more information on the subject. Please be aware that Federal, State, and local tax authorities are continually discussing, reviewing, and modifying tax laws and regulations. If you have any questions always feel free to contact the office. Any reports referenced in this letter will not be prepared unless requested. The information in this letter is subject to change at any time and any changes occurring after December 31, 2024, are not reflected in the attached letter.
Times are changing and rapidly at that. We have noticed that it may not be prudent to have a quick once a year meeting at tax time anymore. Please utilize us throughout the year if you have questions or concerns or are looking for help with what is going on in your tax world.
Federal Updates
Clean Vehicle Credit – If you purchased an electric vehicle (EV) or fuel cell vehicle (FCV) in 2023 or after, you may be eligible for tax credits up to $7,500 for new electric vehicles, and $4,000 for used electric vehicles. In order to qualify, the vehicle’s final assembly must have occurred in North America and it must be primarily used in the U.S. Qualification for the credit also depends on your modified AGI from the year you take delivery of the vehicle or the year before (whichever is less). Your modified AGI must be below $300,000 for MFJ, $225,000 for head of households, $150,000 for all other filers. Nonrefundable.
https://www.irs.gov/credits-deductions/credits-for-new-clean-vehicles-purchased-in-2023-or-after
Used Clean Vehicle Credit | Internal Revenue Service
Residential Clean Energy Credit (Solar Credit) – If you purchased/installed a solar photovoltaic (PV) system or other qualified clean energy property any time in 2024, you may be eligible for a 30% tax credit of the cost. The residential clean energy credit will apply through 2032 and begin to phase down in 2033. Examples of renewable energy projects that the residential clean energy credit covers are solar electric panels, solar water heaters, wind turbines, biomass fuel, fuel cells, battery storage technology, and geothermal heat pumps. Eligibility to claim the credit depends on factors based on the residency status and business use of the home. Nonrefundable.
Residential Clean Energy Credit | Internal Revenue Service
Child Tax Credit –The child tax credit is a tax credit for families with qualifying children. The tax credit is worth up to $2,000 per child under age 17. The credit is partially refundable up to $1,700 per qualifying child for certain taxpayers, but it is nonrefundable for most. Eligibility again depends on your AGI along with your child meeting the eligibility requirements. The credit begins to phase out at $400,000 for MFJ and surviving spouses or $200,000 or below for all other filers. There is no longer an advanced payment option, so parents will receive their credit when they file their returns for 2024.
what you need to know about ctc and actc | Earned Income Tax Credit
Child and Dependent Care Credit – You may be eligible for the child and dependent care credit if you paid someone to care for your qualifying person so you could work or search for work. Generally, a qualifying person is a dependent under the age of 13, a spouse or dependent of any age who is incapable of self-care who lives with you for more than half a year. For 2024, the top credit percentage of qualifying expenses is 35% and ranges down to 20%. Eligible families can claim qualifying child and dependent care expenses of up to $3,000 for one qualifying individual or $6,000 for two or more qualifying individuals. This means that the maximum credit in 2024 of 35% for one dependent’s qualifying expenses is $1,050, or $2,800 for two or more dependents. The credit begins to phase out for taxpayers with an AGI above $125,000. Some examples of qualifying care expenses include nursery school, preschool, a care provider who watches your dependent outside your home. Not anyone qualifies as a qualified care provider, the IRS is quite particular on who qualifies.
https://www.irs.gov/credits-deductions/individuals/child-and-dependent-care-credit-information
Earned Income Tax Credit (EITC) – The earned income tax credit is designed to help taxpayers with low-moderate income wages. The 2024 maximum EITC is $7,830 and can range down to $632 depending on filing status, income, and number of children.
Earned income and Earned Income Tax Credit (EITC) tables | Internal Revenue Service
Premium Tax Credit – ARPA’s expansion of eligibility remains in effect through 2025. Usually, this credit is only claimable by those with household income below 100% of the FPL (Federal Poverty Line). With this expansion, however, anyone who purchases healthcare via the government marketplace, and is otherwise eligible, can claim the credit.
https://www.irs.gov/affordable-care-act/individuals-and-families/the-premium-tax-credit-the-basics
Form 1099-K – Is used specifically for reporting transactions and payments from payment card companies, payment apps and online marketplaces. For 2024, the reporting threshold for 1099-Ks is $5,000. For planning purposes, the reporting threshold in 2025 will be $2,500 and $600 in 2026 and thereafter.
About Form 1099-K, Payment Card and Third Party Network Transactions | Internal Revenue Service
SECURE Act 2.0 Provisions – Building on the original SECURE Act signed into law in December 2019, SECURE 2.0 has new provisions that aims to modify and strengthen the retirement system in many ways will take into effect starting in January 2024.
Student Loan Debt Forgiveness – ARPA excludes from gross income in taxable years 2021 through 2025 amounts related to the discharge of student loan debt. ARPA does not forgive student loan debt; it merely provides a tax-free treatment for anyone receiving a discharge of student loan debt.
Oregon Updates
Oregon Surplus Kicker – Is a way for state government to return some of your taxes to you when revenues are more than predicted. The 1979 Oregon Legislature passed the "Two percent kicker" law, which requires the state to refund excess revenue to taxpayers when actual General Fund revenues exceed the forecast amount by more than two percent. There is no Kicker credit for 2024. However, according to Oregon’s latest revenue forecast there could be another kicker coming in 2026 for tax year 2025.
Another ‘kicker’ tax refund could be in the works for Oregon taxpayers - OPB
Oregon Kids Credit – A tax credit is available to eligible taxpayers with a qualifying child who is 5 or younger. The credit is dependent on your modified AGI. If your AGI is less than $25,000, the full credit is $1,000 for up to five dependents. The credit is phased out at a modified AGI of $30,000. Refundable.
Oregon Department of Revenue : Tax benefits for families : Individuals : State of Oregon
Forest Conservation Credit – A new tax credit is available to small forestland owners that choose to create a forest conservation area. The forest conservation area requires restrictions on harvest to be followed for 50 years by these forestland owners.
Agricultural Employer Overtime Tax Credit –A tax credit is available for employers who pay overtime to their agricultural workers. For the credit to be claimed, employers must apply for it January 1-31 for overtime wages paid in the prior year. Applications can only be electronically filed and they must receive notification of the credit amount from the Department of Revenue.
Oregon agricultural overtime law has begun phasing in. Employers were required to pay overtime to agricultural workers who work 55 hours in one week in 2024. Starting January 1 2025, employers will be required to pay agricultural workers who work 48 hours in a workweek and by 2027 overtime pay will be required for 40 hours.
BOLI : Minimum Wage and Overtime in Agriculture : For Employers : State of Oregon
National Guard Subtraction – Pay for active service in the National Guard can now generally be subtracted from taxable income if the service is authorized by the Governor. Make sure to check the detail on your Oregon residency and station status for exact filing requirements.
Oregon Department of Revenue : Military personnel : Individuals : State of Oregon
Casualty Loss From State-Declared Emergency – If you experienced a loss in Oregon due to a state-declared emergency and were not able to deduct it on your federal return, you may be able to take a subtraction on your Oregon return. This subtraction applied to tax years 2020, 2021, and 2022, as well as future years. If you meet the requirements for the subtraction for those years, you will need to amend your return to take advantage of the subtraction.
Paid Leave Oregon –This program aims to help those who must take leave from work for personal/health reasons by ensuring they receive adequate compensation during these times. The Oregon legislature passed Senate Bill 1515 in March 2024. There are some important changes in the bill that affect how employees can use Oregon Family Leave Act (OFLA), paid time off (PTO), and workers’ compensation with their Paid Leave Oregon benefits. These changes are effective July 1, 2024. Employees are required to contribute 0.6% of gross wages. Large employers with more than 25 employees are required to contribute 0.4%, unless the employer has an equivalent plan in place. Small employers (<25 employees) do not have to pay employer contribution unless they have received assistance grant in the last two years. While on leave, Paid Leave Oregon will pay you a percentage of your wages, based off income, and handle all payments, taking the responsibility away from the employer.
Contributions calculator - Paid Leave Oregon
Pass-Through Entity Elective Tax (PTE-E) – In 2021 in response to the $10,000 cap on the State and Local Tax (SALT) deduction, Oregon established the Pass-Through Entity Elective Tax (PTE-E) as a workaround for certain businesses. For tax years beginning on or after January 1, 2022, partnerships and S corporations may elect to pay an annual tax equal to 9% on the first $250,000 of distributive proceeds, and 9.9% on any proceeds exceeding $250,000. Electing PTE members will receive a credit equal to 100% of the member’s distributive share of the PTE-E tax paid.
Corporate Activity Tax (CAT) (HB 3427: In effect in 2020) – This tax is imposed on businesses for the privilege of doing business in this state. The CAT is not sales tax, nor an income tax, but Oregon’s CAT is measured on a business’s commercial activity–the total amount a business realizes from transactions and activity in Oregon. Certain items are excluded from the definition of commercial activity and, therefore, will not be subject to the CAT. In addition, Oregon’s CAT allows a 35% subtraction for certain business expenses. Registration is required with the Oregon Department of Revenue once receipts are greater than $750,000.
The CAT is applied to Oregon taxable commercial activity in excess of $1 million. The tax is computed as $250 plus 0.57% of Oregon commercial activity of more than $1 million. Only taxpayers with more than $1 million of taxable Oregon commercial activity will have a payment obligation. This was put in effect January 1, 2020.
https://www.oregon.gov/DOR/programs/businesses/Pages/corporate-activity-tax.aspx
Oregon Sick Time – Oregon employers with 10 or more employees (6 if they have a Portland location) are required to implement sick time policies and provide sick time to employees. Otherwise, sick time is protected but unpaid. Employers are also required to provide employees with notice of the law’s provisions.
https://www.oregon.gov/boli/workers/pages/sick-time.aspx
Oregon Hourly Minimum Wage – On July 1, 2024 through June 30, 2025, the standard rate rose to $14.70 per hour, Portland Metro rate rose to $15.95 per hour, and the Non-urban Counties rate rose to $13.70 per hour.
BOLI : Oregon Minimum Wage : For Workers : State of Oregon
Bend Business License – Businesses that are physically located or physically conduct business in the City of Bend are required to file for a Bend business license. The initial application fee is $110, the annual renewal fee is $85, and the late filing fee is $20. The Applications can be obtained online, at City Hall, 710 NW Wall St, or by calling the city at 541-388-5529:
Register a Business in Bend | City of Bend
Tri-Met tax rate has increased to 0.8137% for 2024. Lane Transit District Excise Tax has also increased to 0.79% for 2024. These taxes have been extended to cover unincorporated businesses. These taxes on sole proprietors and partners are paid annually with the taxpayer’s income tax return.
State Unemployment – Oregon’s unemployment base compensation has increased to $54,300 for calendar year 2025. The base tax rate for new employers will be 2.4%. Tip income is subject to state unemployment tax.
All businesses with the following information returns (1099-G, 1099-K, 1099-MISC, 1099-NEC, 1099-R, and W-2G) are required to file information electronically to Oregon through IWIRE. Penalties for not filing timely or accurate 1099s can be as much as $25,000. For more information call 503-945-8100 or check the website: http://www.oregon.gov/DOR/programs/businesses/Pages/iwire.aspx.
The 2024 Withholding Annual Reconciliation Report (Form WR) must be submitted by January 31, 2025. Filing requirements for domestic (household) employees are on an annual basis. The information is reported on 2024 Form OA-Domestic, and must be submitted by January 31, 2025.
Workers' Benefit Fund Assessment Rate – Starting January 1, 2024, the Department of Consumer & Business Services is set to decrease the workers' compensation assessment rate to 2.0 cents for each hour or part of an hour worked by each employee. Employers must pay at least half the amount (1.0 cents per or) and deduct no more than half from workers’ wages.
2024 Payroll and Information Returns Update
To assist you in determining which forms you may need to file in 2025 for the 2024 tax year, we strongly encourage you to visit the IRS website on 1099 filings and the filing deadlines at:
https://www.irs.gov/businesses/small-businesses-self-employed/a-guide-to-information-returns
If you will be issuing 1099-NEC’s to our partnership, complete the recipient’s name box and identification number on the 1099 as follows:
Ashford & Associates LLP
Employer ID# 81-3208681
Filings - Form OQ, Schedule B, and Form 132 electronic payroll filings now go through Frances Online which is a web-based application. https://frances.oregon.gov/Employer/_/
Form OR-WR and Form W-2s need to be filed electronically on Revenue Online.
Oregon Department of Revenue : Welcome Page : State of Oregon
Wages – For 2025 the limits for Social Security have been adjusted up to $176,100 for base wages at a rate of 6.2% for employer and employee, or 12.4% for self-employed individuals. Medicare wages do not have a limit and the rate is 1.45% for employer and employee, or 2.9% for self-employed individuals.
An employer must also withhold additional Medicare Tax of 0.9% from wages it pays to an individual in excess of $200,000 in a calendar year.
FUTA – Federal unemployment tax for 2025 is 0.6% on the base compensation of $7,000 for a maximum tax per employee of $42. This assumes a 5.4% credit for payments to your state unemployment fund. If you do not pay state unemployment, your FUTA rate may be higher up to a maximum of 6.0%. For 2024, the FUTA deposit threshold is $500, i.e., if the deposit is less than $500 you may carry it forward to subsequent periods until the threshold is met.
Pension Plan Limit Changes – For 2025, the 401(k) deferral limit rose to $23,500. The catchup contribution limit remains at $7500 and annual contributions to an IRA limit remains at $7,000. The defined contribution limit is $69,000 and the benefit limit is now $275,000. Key employee dollar limits are $220,000, Highly Compensated Employee is $155,000, and the Annual Compensation Limit is $345,000.
Other Payroll Items
2024 Social Security, Medicare and Federal Unemployment Taxes for Household Employees – All taxes are reported and paid on Form 1040, Schedule H unless the taxpayer is already filing Form 941 or 943 for an unincorporated business. You must complete Form W-2, Wage and Tax Statement for each household employee and give copies to your employee by January 31, 2025. You must send copy A of Form W-2 with Form W-3 to the Social Security Administration (SSA) by January 31, 2025. Oregon also follows annual reporting rules but uses a separate form called Form OA-Domestic. An Oregon Form WR should also be completed for your household employees.
Information Returns – Everyone engaged in a trade or business, including partnerships and non-profit organizations, must file information returns for calendar year 2024 for certain payments made to others in the course of a trade or business. Examples include payments to individuals and partnerships for services, rent, interest, and debt forgiveness. Also required are information returns to report the purchase of real estate.
You must have a W-9 form on file for every 1099 form you issue:
W-9’s should be in the payee’s possession prior to any payments being made. Blank W-9 forms and instructions can be found at:
Penalties start at $50 per informational return if the returns are not filed until after the deadline and can grow to $290 per information return if returns are not filed by August 1st. If you do not file the information forms at all and you are found by the IRS that you intentionally disregarded the filing rules, the penalty is $580 per return and you can be assessed additional penalties on top of that. Examples of where intentional disregard may be asserted are not getting a signed Form W-9 from the recipient, or you do not have all the information from the recipient necessary to file a proper 1099.
Reporting payments made to a corporation are generally not required unless the payments are the following:
1. Medical and health care payments
2. Withheld Federal income tax or foreign tax
3. Barter exchange transactions
4. Substitute payments in lieu of dividends and tax-exempt interest
5. Acquisitions or abandonment of secured property
6. Cancellation of debt
7. Payment of attorney’s fees and gross proceeds paid to attorneys
8. Fish purchases for cash
9. The credits for qualified tax credit bonds treated as interest
10. Merchant card and third-party network payments
11. Federal executive agency payments for services
For additional information and a complete listing of 1099 instructions please visit the IRS website at:
https://www.irs.gov/businesses/small-businesses-self-employed/a-guide-to-information-returns .
As of 2020 the IRS has brought back the Form 1099-NEC (Non-Employee Compensation) to simplify 1099 deadlines. Use form 1099-NEC over 1099-MISC for at least $600 in services performed by someone who is not your employee, cash payments for fish, or payments to an attorney.
https://www.irs.gov/instructions/i1099msc
Additional information regarding penalties and actions for missing and incorrect name/tax identification number combinations can be found at the website:
http://www.irs.gov/pub/irs-pdf/p1586.pdf
In the recent Oregon Tax Court case of Millers vs. Department of Revenue, State of Oregon, tax deductions were disallowed due to 1099s not being filed timely. The basis of the decision was made under Oregon Revenue Statute 305.217.
Other Information
Foreign Accounts and Foreign Assets – If at any time during the year you had a foreign bank account or other financial assets exceeding $10,000, Treasury Department forms must be filed. The fines for not reporting these assets can be as high as $500,000. Criminal prosecution could also result with a maximum prison sentence of up to 10 years. Foreign institutions are now required to cooperate with the IRS to facilitate the tracking of these assets. You must disclose to us if at any time you had a foreign bank account or other foreign assets over $10,000. Unreported income from foreign assets could result in a penalty of 40% and extend the statute of limitations from three to six years. This would allow the IRS an extra three years to assess additional tax.
If you have any unreported income from foreign assets in prior years, please contact us. This is a very serious matter that should be addressed immediately.
Comparison of Form 8938 and FBAR requirements | Internal Revenue Service
Health Savings Accounts – For 2025, the Health Savings Account (HSA) contribution levels are as follows: individual contribution levels are $4,300 while family contributions are $8,550. A catch-up contribution of $1,000 is available to both individuals and families for those individuals who are age 55 and older.
Standard Deduction – For tax year 2024 the standard deduction is increased to $29,200 for married filing jointly and surviving spouses, $14,600 for single and married filing separate, and $21,900 for head-of-household filers. Personal exemption deductions for a taxpayer, spouse and dependents are suspended outright.
Tax Brackets – 37% for incomes over $609,350 ($731,200 for married couples filing jointly)
35% for incomes over $243,725 ($487,450 for married couples filing jointly)
32% for incomes over $191,950 ($383,900 for married couples filing jointly)
24% for incomes over $100,525 ($201,050 for married couples filing jointly)
22% for incomes over $47,150 ($94,300 for married couples filing jointly)
12% for incomes over $11,600 ($23,200 for married couples filing jointly)
10% for incomes under $11,600 ($23,200 for married couples filing jointly)
Alimony – The alimony deduction by payor has been eliminated, if payment was pursuant to a divorce or separation decree executed after 2018, or to a modification to an existing agreement made after 2018 (if the modification expressly provides for the new law to apply). Accordingly, alimony under post-2018 agreements or modifications is no longer includible in the recipient’s income.
Gift Tax Exclusion – For 2024 the annual exclusion for gifts was $18,000 to each donee. For 2025 the annual exclusion will be up to $19,000.
Frequently asked questions on gift taxes | Internal Revenue Service
Home Sale Exclusion – If from the sale of your primary house you have capital gain, you may qualify to exclude up to $250,000 ($500,000 if married filing joint) of that gain if you meet qualifications for both the ownership and use test.
Topic no. 701, Sale of your home | Internal Revenue Service
Moving Expenses – Qualified moving expense deduction has been suspended except for the Armed Forces on active duty. Any qualifying reimbursements a taxpayer receives from their employer in years 2018 or later will be includable in their income.
College Savings – 529 plans now allow for up to $10,000 in annual distributions for tuition at public, private, or religious elementary and secondary schools. Oregon does not allow the expanded limit.
Oregon 529 College Savings Plan – The refundable credit for 2024 is based on filing status and AGI. The income tax credit can be worth up to $360 (MFJ), $180 for all other filing status, with a tiered phase-out.
Charity – The 100% Adjusted Gross Income (AGI) limit for cash contributions to public charities is 60% of AGI for 2023 which is the same as it was in 2022. Taxpayers that do not itemize, can no longer claim a deduction for charitable contributions.
Hobby Activities – In prior years taxpayers were at least allowed to offset any income from a hobby by related expenses in calculating their taxable income. Under the TCJA the miscellaneous itemized deduction for hobby expenses is no longer allowed; as a result, taxpayers will now pay tax on any income generated by hobby activities.
Corporate Tax Rate – As of 2018 federal corporate tax rate is a flat 21%. Only those corporations that regularly have taxable income of $50,000 or less will realize an increase in their tax rate (15% to 21%).
Sales Tax – South Dakota v. Wayfair, Inc. changed tax laws for businesses that sell items online. This ruling overturned the old Quill v. North Dakota ruling that established the physical presence test to require sales tax to be collected in a state. Software programs are available that can help ensure compliance with each state’s sales tax requirements.
College Opportunity Grant – You may be able to claim a tax credit if you participated in the College Opportunity Grant tax credit auction conducted by the Department of Revenue, in cooperation with the Higher Education Coordinating Commission (HECC).
Federal Tax Subtraction – The federal tax subtraction on Oregon tax returns ranges from $0 to $8250 for 2024.
Oregon Qualified Business Income Reduced Tax Rate – Sole Proprietorships now qualify for the reduced rate.
Businesses
Personal Property Tax Reports – The reporting date for business personal property tax reports is December 31. You will need to file a report listing all equipment owned on December 31, 2023 by March 15, 2024 with no extensions. The taxes which result from this filing won’t be due until November 15, 2024. If you would like us to prepare this report for you, please contact the office no later than January 31, 2024.
Business Meals – Remain only 50% deductible in 2024.
Bonus Depreciation – For tax year 2024 bonus depreciation is 60%. From September 2017- December 2023 TCJA allowed business owners to deduct 100% of qualified assets. The bonus depreciation now decreases by 20% each year.
Home Office – For businesses, the home office deduction allows qualified taxpayers to deduct certain home expenses that are calculated on Form 8829.
How small business owners can deduct their home office from their taxes | Internal Revenue Service
Mileage – Beginning on January 1, 2025, the standard mileage rates are $0.70/mi for business, $0.21/mi for medical or military moving and $0.14/mi for charity.
Per-Diem Reimbursements – The General Services Administration (GSA) sets the per diem reimbursement rates. In order to be reimbursed, the employer must maintain an accountable plan.
More information on the GSA and rates can be found at: https://www.gsa.gov/travel/plan-book/per-diem-rates
More information on accountable plans can be found at: http://www.irs.gov/publications/p463/index.html.
This letter was not meant to be exhaustive, and there are always individual details with your tax scenario. Please contact the office if there is anything we can assist with, otherwise we look forward to helping with your 2024 tax filings.
Sincerely,
Ashford & Associates, LLP
Certified Public Accountants