REMINDERS: THREE IMPORTANT JANUARY 1STS
Although we have mentioned them before, this 2023 Year End Alert starts out with reminders of the three upcoming important January 1sts (followed by an important March 1st reminder).
January 1, 2024: CTA reporting begins for new business entities. The federal Corporate Transparency Act (“CTA”) reporting obligation begins for owners of certain business entities formed on or after January 1, 2024. See this prior Gunster alert for more details.
January 1, 2025: CTA reporting must have been completed for business entities already in existence on January 1, 2024, regardless of how long ago they were created. See this prior Gunster alert for more details.
January 1, 2026: many 2017 tax act provisions expire. January 1, 2026 is when many provisions of the 2017 tax act are due to expire, resulting in a reversion to pre-2018 law in many respects. Most notable among those is the significant reduction in the federal gift and estate tax and generation-skipping transfer tax exemption amounts, which are $12.92 million for 2023 and will increase to $13.61 million for 2024 (both of which numbers reflect inflation adjustment increases from the 2017 act’s $10 million base amount). Since inflation is expected to continue through 2024, the 2025 exemption amounts likely will be higher. Beginning on January 1, 2026, the exemption amounts will revert to the pre-2017 act $5 million base amounts, but still will be indexed for intervening inflation.
Of course, the foregoing is dependent on no changes in federal tax law between now and 2026. Given the current state of political control in Washington, with the Republicans narrowly controlling the House, and the Democrats narrowly controlling the Senate and controlling the White House, no major federal tax legislation is anticipated to be passed in 2024. Nonetheless, if either party were to gain complete control over Congress and the Presidency in the November 2024 elections, the odds of federal tax legislation being adopted thereafter would increase substantially.
Depending on which party might end up with complete control, we could see either an extension or even expansion of the 2017 tax act’s provisions or, conversely, the expiration of those provisions and perhaps some further contraction of current provisions.
As we have reported before, contractions that previously have been proposed, but failed to pass, have included: (1) raising top individual income and capital gains tax rates; (2) cutting in half the lifetime gift and estate and generation-skipping transfer tax exemptions; (3) ending tax free basis adjustments for assets owned by a decedent at death (often resulting in basis “step-up” or increases); (4) denying valuation discounts for family limited partnerships and family limited liability company interests; and (5) substantially restricting tax planning benefits of certain grantor trust techniques, such as grantor retained annuity trusts (“GRATs”), sales to certain grantor trusts known as IDGTs or IDITs, and irrevocable life insurance trusts (“ILITs”).
EVERY MARCH 1ST: new Florida homestead exemption applications due. March 1st of each year is the due date for filing a new Florida homestead real property exemption application with the property appraiser of the county where the property is located.
If there are no changes in circumstances (such as a change in ownership caused by the death of an owner or grantor of a revocable trust owning the homestead), once granted, the homestead exemption continues in effect from year to year. Nonetheless, property appraisers in certain counties have denied homestead exemptions that under applicable law arguably should be granted or, once having been granted, should continue. Some homeowners have successfully appealed those denials and had them reversed.
2024 CHANGES IN FEDERAL INDIVIDUAL TAX LAW PROVISIONS
Federal Estate, Gift, and Generation-Skipping Transfer Taxes
As noted above, beginning in 2024, the gift and estate tax and generation-skipping transfer tax exemptions will increase from $12.92 million for 2023 to $13.61 million for 2024. The annual gift tax exclusion will increase from $17,000 for 2023 to $18,000 for 2024.
Federal Individual Income Taxes
Some, but not all, federal individual income tax provisions are adjusted for inflation. For 2024, the thresholds for each tax bracket are up 5.4%, which is the second largest increase after the 7.1% increase for 2023. For example, the top 37% federal income tax bracket for 2024 will apply to married couples filing jointly with incomes above $731,200 and to single filers with incomes above $609,350. The zero percent capital gains tax will apply to married filers with taxable incomes up to $94,050 and to single filers with incomes up to $47,050. The standard deduction will increase to $29,200 for married filers and to $14,600 for single filers.
In addition, an individual retirement account (“IRA”) holder will be allowed to contribute up to $105,000 to a charity and count it toward his or her minimum required distribution from the IRA.
2024 CHANGES IN RETIREMENT CONTRIBUTION LIMITS
Inflation adjustments also apply to certain retirement account contribution limits. For 401(k) and other workplace plans, the contribution limit will rise to $23,000. For IRAs, the contribution limit will rise to $7,000. Also, those 50 and older will be allowed to make additional “catch-up” contributions of $1,000 to IRAs and $7,500 to 401(k) and other workplace plans.
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This publication is for general information only. It is not legal advice, and legal counsel should be contacted before any action is taken that might be influenced by this publication.
Gunster, Florida’s law firm for business, provides full-service legal counsel to leading organizations and individuals from its 13 offices statewide. Established in 1925, the firm has expanded, diversified and evolved, but always with a singular focus: Florida and its clients’ stake in it. A magnet for business-savvy attorneys who embrace collaboration for the greatest advantage of clients, Gunster’s growth has not been at the expense of personalized service but because of it. The firm serves clients from its offices in Boca Raton, Fort Lauderdale, Jacksonville, Miami, Naples, Orlando, Palm Beach, Stuart, Tallahassee, Tampa Bayshore, Tampa Downtown, Vero Beach, and its headquarters in West Palm Beach. With more than 280 attorneys and consultants, and over 290 committed support staff, Gunster is ranked among the National Law Journal’s list of the 500 largest law firms and has been recognized as one of the Top 100 Diverse Law Firms by Law360. More information about its practice areas, offices and insider’s view newsletters is available at www.gunster.com.