Day: November 16, 2023

Time Equipment Purchases and Certain Facility Updates to Maximize Tax Advantages

Have you been thinking about purchasing new or used equipment to enhance your manufacturing capabilities? How about upgrading technology and software or updating your facility and equipment? With end of year approaching, you have limited time left to consider whether to purchase, lease, or finance certain assets to take advantage of Section 179 tax benefits. It’s also a good time to consider how Section 179 may play into your business and tax strategy for 2024.

Section 179 uses first-year expensing. That means you can deduct the expense for an eligible asset immediately, rather than depreciating it over time. It serves as an incentive for a business owner to invest in the business and enhance its capabilities and services with the purchase and installation of capital equipment.

One big caveat: You must put the asset you purchase into service the year that you plan on taking the deduction. With just weeks left in 2023, it will be important to account for this in your planning.

Most small and mid-sized business owners qualify for Section 179 deductions. Qualifying purchases can include office furniture and equipment; computers and software; certain vehicles (some with annual deduction limits); machines and manufacturing equipment; and other property used for business. Security systems, HVAC systems, roofs, fire protection systems, and other structural improvements to non-residential buildings may also qualify for a Section 179 deduction.

Equipment can be new or used (as long as you weren’t the prior owner). It can be purchased outright, financed, or leased. So, let’s say you want to purchase qualifying equipment for $1 million and you have $250,000 for the down payment and finance the remaining $750,000. As long as the equipment is put into service this year, you can deduct the full $1 million this year.

Through 2026, there’s an added bonus. For expenses not eligible for the Section 179 deduction, there’s a bonus depreciation allowance in year one. For 2023, bonus depreciation is 80% — remember, that’s in addition to regular depreciation. The bonus depreciation decreases for the next three years (60% for 2024, 40% for 2025, 20% for 2026). Starting in 2027, this additional benefit will no longer be available. Because of this phase-out, businesses benefit the most by making capital purchases sooner rather than later.

Section 179 numbers to know for 2023:

Maximum 179 deduction: $1,160,000
Phaseout threshold begins at $2,890,000 and ends at $4,050,000. (So, if you buy eligible assets that cost more than $2,890,000, your maximum 179 deduction is reduced dollar for dollar by amounts over $2,890,000. Purchases above $4,050,000 are not eligible for a 179 deduction, but bonus depreciation can still apply.)
Bonus depreciation: 80%

If you need help determining whether to act quick to take advantage of Section 179 this year or whether to make it part of your tax strategy for 2024, your RBT CPA client manager can help – reach out to him/her today. Please remember RBT CPAs is here to help with your accounting, tax, audit, or business advisory needs. Interested in learning more? Give us a call today.

RBT CPAs is proud to say 100% of its work is prepared in America. Our company does not offshore work, so you always know who is handling your confidential financial data.

Teacher Pay Penalty Is Getting Worse

In 2022, public school teachers made 26.4% less than professionals with similar educations, a rate that hasn’t been seen since 1960, according to a report by the Economic Policy Institute (EPI). (Allegretto, Sylvia. “Teacher pay penalty still looms large.” September 29, 2023. https://www.epi.org/publication/teacher-pay-in-2022/#epi-toc-9.)

According to the report, the “pay penalty” has been growing significantly since the mid 90’s, when it was 6.1% and teachers were earning 93.9 cents for every dollar earned by other professionals. To put the financial impact of the pay penalty into perspective, when you compare the average weekly wage of public school teachers and similarly educated professionals, in 2022 teachers earned an average of $1,329 as compared to $2,167 for other college graduates or 73.6 cents for every dollar similarly educated professionals made.

Here’s another way to look at it: teachers earned an average of 73.6 cents for every dollar similarly educated professionals made. New York teachers are better off than teachers in many other states; its pay penalty reached 14.6% in 2022.

Inflation is not helping, resulting in a loss of $128 a week between 2021 and 2022 for teachers (as compared to an estimated loss of $3 for non-teaching professionals).

While many assert the pay penalty is eliminated by teachers’ generous benefit packages, the EPI report shows that’s simply not true. When you look at total compensation – benefits plus pay – the pay penalty drops to 17% for 2022. That is better than 26.4%, but still represents a significant gap with what counterparts in other professions make and as compared to the 2.7% that existed in 1993.

Upon reading this report, I was reminded of discussions during the late 80s about teacher pay. The education sector was advocating to boost teacher pay for two reasons: to attract the best and brightest people into teaching and to ensure they wouldn’t be financially penalized for joining the education sector rather than the corporate world. The turnaround in the pay penalty achieved by the mid-90’s shows this line of thinking was working. Somewhere in the early 2000s it started losing momentum.

Fast forward. Sandy Hook and numerous other large-scale school shootings occurred, as did Covid. Technology and AI started changing at the speed of light. Politics, government mandates, and changing societal norms have taken on as much priority as teaching academics. All of this has dramatically increased the pressure on educational institutions and teachers. With the geopolitical unrest occurring in the world today, it’s only getting worse.

With a shrinking workforce, due largely to the mass retirement of Baby Boomers, the pay penalty exacerbates the challenge of building a pipeline of teacher talent for the future, while recruiting and retaining teachers today.

According to the report overview, there is a potential path to turn this around involving paying teachers more; providing more federal and state funding to schools; leveraging collective bargaining, and more. Personally, I wonder if there is an opportunity to educate the public about the pay, benefits, social, political, and other challenges teachers face so they are more informed going into budget voting season and discussions.

Undoubtedly, I’m preaching to the choir in writing this article and hope that some of the information garnered in the EPI report can prove useful as you chart the course for the years ahead.

In the words of the report’s author, Sylvia Allegretto, “One of our nation’s highest ideals is the promise to educate every child without regard to means. In many respects, we have always fallen short on that promise. And there are many issues to be addressed around public education and its funding. But one thing is for sure. A world-class public educational system cannot be accomplished without the best and the brightest heading our classrooms. And it cannot be done on the cheap.”

Please remember RBT CPAs is here to help with your accounting, tax, audit, or business advisory needs. Interested in learning more? Give us a call today.

RBT CPAs is proud to say 100% of its work is prepared in America. Our company does not offshore work, so you always know who is handling your confidential financial data.

Equipment Purchases and Certain Facility Updates to Maximize Tax Advantages

Have you been thinking about purchasing new or used medical equipment to enhance your veterinary services? How about upgrading technology and software or updating your facility and equipment? With end of year approaching, you have limited time left to consider whether to purchase, lease, or finance certain assets to take advantage of Section 179 tax benefits. It’s also a good time to consider how Section 179 may play into your business and tax strategy for 2024.

Most small and mid-sized business owners qualify for Section 179 deductions. Qualifying purchases can include office furniture and equipment; computers and software; certain vehicles (some with annual deduction limits); machinery and medical equipment; and other property used for business. Security systems, HVAC systems, roofs, fire protection systems, and other structural improvements to non-residential buildings may also qualify for a Section 179 deduction.

Through 2026, there’s an added bonus. For expenses not eligible for the Section 179 deduction, there’s a bonus depreciation allowance in year one. For 2023, bonus depreciation is 80% — remember, that’s in addition to regular depreciation. The bonus depreciation decreases for the next three years (60% for 2024, 40% for 2025, 20% for 2026). Starting in 2027, this additional benefit will no longer be available. Because of this phase out, businesses benefit the most by making capital purchases sooner rather than later.

Section 179 numbers to know for 2023:

Maximum 179 deduction: $1,160,000
Phaseout threshold begins at $2,890,000 and ends at $4,050,000. (So, if you buy eligible assets that cost more than $2,890,000, your maximum 179 deduction is reduced dollar for dollar by amounts over $2,890,000. Purchases above $4,050,000 are not eligible for a 179 deduction, but bonus depreciation can still apply.)
Bonus depreciation: 80%

RBT CPAs is proud to say 100% of its work is prepared in America. Our company does not offshore work, so you always know who is handling your confidential financial data.

Benefit Limits for 2024

2024 limits for certain employer sponsored retirement and welfare plans, as well as the Social Security Wage Base, were released earlier this month.

Payroll and plan administration systems should be updated to reflect the new limits. In addition, plan sponsors should communicate the 2024 limits to employees in summary plan descriptions and other plan communications (i.e., enrollment).

RETIREMENT PLAN LIMITS FOR 2024

Annual compensation limit: $345,000
Highly compensated threshold: $155,000
Key employee compensation threshold: $220,000
401(k), 403(b), most 457s and Thrift Savings Plan before-tax contributions: $23,000
401(k), 403(b), most 457s and Thrift Savings Plan catch-up contributions for age 50 and over: $7,500
Defined contribution plan annual contribution limit: $69,000
Defined benefit annual benefit and accrual limit: $275,000
IRA annual contributions: $7,000
IRA catch-up contributions for age 50 and over: $1,000
SIMPLE contribution limit: $16,000
SIMPLE catch-up contributions limit: $3,500
ESOP limit for lengthening of general five-year distribution period: $275,000
ESOP limit for maximum account balance subject to general five-year distribution period: $1,380,000

HEALTH & WELFARE PLAN LIMITS FOR 2024

High Deductible Health Plan (HDHP) and Health Savings Accounts (HSAs):

HDHP maximum out-of-pocket limit self-only/family coverage: $8,050/$16,100
HDHP minimum annual deductible self-only/family coverage: $1,600/$3,200
HSA annual contribution limit for self-only/family coverage: $4,150/$8,300
HSA catch-up contributions for age 55 and over: $1,000

FLEXIBLE SPENDING ACCOUNT LIMITS FOR 2024: Final numbers not available yet

Healthcare contribution
Healthcare carryover
Dependent care contribution

SOCIAL SECURITY

Taxable Wage Base: $168,600

For more details refer to IRS.gov or Notice 2023-75. If you need to free up time to focus on benefits compliance, you can count on RBT CPAs to handle all of your accounting, audit, and tax needs. To learn more, give us a call today.

RBT CPAs do not outsource work to any other country. All of our work is prepared in the U.S.A.

Please Note: RBT CPAs is an accounting, audit, tax, and business advisory firm. We are not a law firm and the information provided should not be construed as advice. As always, if you need legal counsel, it’s in your best interest to contact a law firm.

OSHA’s Tracking of Workplace Injuries and Illnesses Rule Takes Effect January 1, 2024

The U.S. Department of Labor’s Occupational Safety and Health Administration (OSHA) Improve Tracking of Workplace Injuries and Illnesses reporting rule takes effect January 1, 2024. As a result, more employers will be required to submit detailed data about workplace injuries and illnesses.

The final rule was issued July 21, 2023. It reverts from provisions adopted in 2019 largely to what was effect in 2016. OSHA is hoping this helps reduce workplace injuries and illnesses in high hazard industries. It will use the data for strategic outreach and enforcement. It also intends to make the data collected available online to the public.

According to the Department of Labor (DOL), “This will enable the agency to interact directly with these establishments, through enforcement and/or outreach activities, to address and abate the hazards and improve worker safety and health. These same data will also allow OSHA to better analyze injury trends related to specific industries, processes, or hazards.”

The DOL also asserts that by making injury and illness data public, potential customers, employees, and others will have more information to make decisions about health and safety at a particular establishment.

Under the final rule, once a year, establishments – meaning a physical work location, not a company as a whole – with:

100 or more employees in certain designated industries* must electronically submit information from OSHA Forms 300 and 301.
20 to 249 employees in certain designated industries* will continue to electronically submit information from 300A annual summary to OSHA.
250 or more employees, regardless of industry, are required to keep records under OSHA’s illness and injury regulation and electronically submit Form 300A information.

*Industries are defined in Appendix A and Appendix B in the Final Rule.

March 2 is the deadline for submitting prior year data. So, data from 2023 must be submitted by March 2, 2024. Covered establishments will submit data via OSHA’s Injury Tracking Application.

It’s important to note that the rule directly applies to OSHA states, but not state plans (although state plans are required to adopt similar requirements within six months of the Final Rule). New York does operate an OSHA-approved state plan, but it only covers state and local government workers. Private sector employers and their workers are covered by federal OSHA.

If you have any questions about the Final Rule or its implementation, it’s in your best interest to contact legal counsel. RBT CPAs is not a law firm; we specialize in accounting, tax, audit, and business advisory services. Interested in learning more? Give us a call today.

RBT CPAs is proud to say 100% of its work is prepared in America. Our company does not offshore work, so you always know who is handling your confidential financial data.