The US Department of Labor Finalizes Overtime Salary Requirements

On April 23, 2024, the US Department of Labor (DOL) announced changes to changes to overtime salary requirements. These incremental increases to compensation thresholds will determine whether an employee is exempt from federal overtime pay requirements.

The changes take effect on July 1, 2024 and are expected to affect millions of employees previously deemed exempt. The new rules encompass thresholds for both “highly-compensated employees” (HEC’s) and “executive, administrative, or professional” employees (EAP’s).

As of July 1, 2024  

• To qualify as an EAP-exempt employee, the threshold increases from $684 per week (or the equivalent of $35,568 annually) to $844 per week (or the equivalent of $43,888 annually).
• To qualify as an HCE-exempt employee, the threshold increases from $107,432 to $132,964 annually.

As of January 1, 2025  

• To qualify as an EAP-exempt employee, the threshold increases to $1,128 per week (or the equivalent of $58,656 annually).
• To qualify as an HCE-exempt employee, the threshold increases to $151,164 annually.

In addition, on July 1, 2027, the DOL will adjust the EAP and HCE thresholds every three years. These increases are based on the Bureau of Labor Statistics’ most recently available earnings data.

Depending on the nature of your workforce, preparing for these changes could be challenging and you may have many questions, such as:

• How will this affect company budgets?
• Would targeted salary increases for certain employees to exceed exempt thresholds be more cost effective?
• Are scheduling changes the best way to contain costs?
• How will this be communicated to employees?

Get More Info on the Changes to Overtime Salary Requirements

For detailed information on the DOL’s updated overtime rules and how to manage any potential financial repercussions, call us at (401) 921-2000 or contact us here. We are ready and happy to assist you.

The SECURE Act 2.0 of 2022 brought many retirement plan provisions aiming to increase savings and simplify rules for 2023 and beyond. This is what you need to know for 2024.

Since January 1, 2023, the required age for which distributions need to be taken from retirement plans increased from 72 to 73. Taxpayers who turned 73 in 2023 had the ability to defer their first distribution until April 1, 2024. If this was done, they must take their distribution by the end of 2024. This needs to be considered for tax planning as the additional distribution within the same calendar year could make these individuals subject to a higher tax rate.

SECURE Act 2.0: Distribution Exceptions

There are two new exceptions to the 10% early withdrawal penalty effective for distributions made after December 31, 2023.

Emergency Personal Expenses

Distributions up to $1,000 are allowed to pay for “unforeseeable or immediate financial needs relating to necessary personal or family emergency expenses.” No subsequent withdrawals are allowed from the same plan within a three-year period unless:

• the distribution is repaid to the plan; or
• new contributions exceed the amount of the emergency withdrawal.

Domestic Abuse Victims

This change allows retirement plan participants who self-certify they’ve experienced domestic abuse to make withdrawals without being subject to the 10% early withdrawal penalty. These individuals can withdraw the lesser of $10,000, indexed for inflation, or 50% of their vested account balance. Participants can choose to repay withdrawals over a three-year period. Funds repaid within the allowable period can be used to claim a refund for any income taxes paid on the amounts previously taxed upon withdrawal.

SECURE Act 2.0: Additional Considerations

The SECURE Act 2.0 also provides additional relief to the following groups:

Beneficiaries of 529 College Savings Accounts

Beneficiaries will be permitted to make direct trustee-to-trustee rollovers into a Roth IRA tax-free. This will provide an option for those who have a remaining balance in their 529 account after the beneficiary’s education is complete. The account must have been open and in the beneficiary’s name for more than 15 years. The eligible rollover amount must have been in the 529 account for at least five years. Rollovers are subject to annual maximum Roth contribution limits, but are not limited based off the taxpayer’s adjusted gross income.

Widows/Widowers

Effective January 1, 2024, the surviving spouse of an employee who dies before the required minimum distributions have begun under their employer-provided qualified retirement plan may be able to be treated as the employee for purposes of the required minimum distributions (RMD). The surviving spouse must be the sole beneficiary of the account owner. Once they elect in, the surviving spouse will be treated as the employee for RMD rules of Code Sec. 401(a)(9).

Required minimum distributions will not need to begin before the date the deceased employee would have attained the applicable age. If the surviving spouse dies before the distributions begin, the surviving spouse is then treated as the employee to determine the distribution period.

SECURE Act 2.0: Roth Limitations

The catch-up limit on IRA contributions is now indexed for inflation. Under prior legislation, the limit on IRA contributions increased by $1,000, not indexed for inflation, for individuals who have reached age 50.

Important changes are coming into effect to Roth plan distribution rules. Prior to the passing of the SECURE Act 2.0, required minimum distributions were not required to begin before the death of a Roth IRA’s owner. However, pre-death distributions were required for Roth designated employer plans such as a Roth 401(k). This requirement has been eliminated.

Questions?

If you have any questions regarding estates, gifts, or any topics in this area, give us a call at (401) 921-2000 or contact us here.

The U.S. Internal Revenue Service has revealed increases in the annual gift tax exclusion and the lifetime estate and gift tax exemption for 2024.

What is the Annual Gift Tax Exclusion?

The annual gift tax exclusion allows taxpayers to transfer gifts to unlimited donees – up to a designated yearly amount – without experiencing gift taxes.

The lifetime estate and gift tax exemption provides the limit for lifetime gifts as of the date of the gift (or date of death) before incurring a gift or estate tax liability.

The exclusion is also an important consideration for estate planning purposes. Taxpayers can make gifts up to that amount before utilizing any of their lifetime estate and gift tax exemption. The value of any gifts in excess of the gift tax exclusion would then be subtracted from the lifetime exemption.

As the lifetime exemption gets used over the taxpayer’s lifetime, the amount that can be excluded from the taxable estate upon death also decreases.

Updated Amounts for 2024

For the 2024 tax year, the exclusion increased by $1,000 to a total of $18,000. The exclusion covers gifts an individual makes to each donee per year.

Married taxpayers can combine their gift tax exclusion as they can share their two annual exclusions. For example, married taxpayers with three children could potentially transfer $36,000 a year to each child (or a total of $108,000) without incurring any gift taxes.

For 2024, the lifetime exemption will increase by $690,000 to $13,610,000. Additionally, the total available to a married couple will be $27,220,000 in 2024.

Questions?

If you have any questions regarding estates, gifts, or any topics in this area, give us a call at (401) 921-2000 or contact us here.

Since 2018, taxpayers have been able to take advantage of favorable bonus depreciation rules found in the Tax Cuts and Jobs Act. However, these rules will begin to phase out over the next several years. Read on to find out how this could affect you.

Bonus Depreciation

The passing of the TCJA allowed most taxpayers to claim 100% bonus depreciation for the cost of qualifying business property. This included tangible property with a recovery period of 20 years or less and depreciated under MACRS rules. It also included most computer software, water utility property, and qualified artistic productions.

However, the anticipated phase-out of bonus depreciation became effective on January 1, 2023. For assets placed in service starting on this date, the deduction for the first-year will be reduced to 80% of the asset’s adjusted basis. Under current law, bonus depreciation will continue to drop an additional 20% annually through 2027.

The deduction phase-out is scheduled as follows:

• 2023: 80%
• 2024: 60%
• 2025: 40%
• 2026: 20%
• 2027: 0%

These changes present tax-planning opportunities to consider as companies project out their taxable income. It’s also important to note that it’s possible to elect out, if so desired.

Section 179 Depreciation

In lieu of bonus depreciation, taxpayers may also be able to expense the cost of certain fixed asset purchases under Code Section 179. Eligible property includes tangible 1245 property depreciated under MACRS, off-the-shelf computer software, qualified improvements, roofs, HVACs, fire protection systems, and security systems. The acquired eligible property may be new or used. Taxpayers can elect to utilize Section 179 when the return is filed or on an amended return in the year of election.

The limits for 2023 and 2024 are as follows:

*Once this threshold is hit, a dollar-for-dollar phase out begins.

Questions?

If you have any questions regarding bonus depreciation or section 179 limits, call us at 401-921-2000 or fill out our contact form to get started.

You may not think about New Hampshire state income tax much, or lack thereof. But if you own a sole proprietorship or real estate such as a rental property, you may be generating income that’s subject to the New Hampshire Business Profits Tax and Business Enterprise Tax.

New Hampshire State Income Tax Filing Requirements

There is typically no New Hampshire state income tax withheld on wages and salaries, and many people choose to live in the state to avoid paying on it. However, individuals who own a sole proprietorship or are a sole owner of a single member LLC that has business activity in New Hampshire may have a filing requirement for the following:

• Business Profits Tax (BPT)
• Business Enterprise Tax (BET)

There are filing thresholds for each tax type that may change each year.

BPT and BET Thresholds

The BPT threshold is based on gross business income. On the other hand, the BET threshold is based on an enterprise value tax base. The business enterprise calculates its enterprise value tax base under New Hampshire regulation by adding up all compensation paid or accrued, all interest paid or accrued, and all dividends paid. The filing threshold for the 2023 tax year is as follows:

• $103,000 of business income (BPT)
• $281,000 of enterprise tax value base (BET)

Personal Services Deduction

If you meet the filing requirement for the BPT return, you may also qualify for the personal services deduction. This could reduce the amount of tax you owe on your business income. According to the New Hampshire revised statute section 77-A:4, this deduction is for total compensation that is “reasonable and fairly attributable” to its proprietor. Taking the full amount of this deduction requires that you maintain records necessary to prove that this deduction is reasonable.

New Hampshire State Income Tax: Get More Details

Want more information regarding potential exposure to BPT and BET tax liabilities? Call (401) 921-2000 or fill out our contact form to learn how you can decrease your potential tax liability.

Financial ratios for construction companies can be a key indicator of current performance and potential for future growth. No one ratio can truly tell the whole story of a company’s health. However, looking at several key ratios can help identify trends in the company and its overall well-being. Primary users of financial statements, including banks, bonding agents, insurance companies, and others, will usually be interested in this information. In addition, company management must ensure they fully understand these ratios before distributing their financials to avoid surprise by any concerns or follow-up questions.

5 Important Financial Ratios for Construction Companies

Here, we’ll explore several common ratios and how they can help you measure business performance and mitigate risk. The following are some key financial ratios for construction companies:

Current Ratio

This ratio compares current assets over current liabilities to determine how many times per year a company can pay its liabilities within the next 12 months. The company should have a ratio of at least 1.0 – 1.3 to ensure sufficient assets for covering liabilities as they become due.

Quick Ratio

This is a close relative of the current ratio, which includes all current assets in the calculation. However, the quick ratio just includes cash, cash equivalents, short term investments, and accounts receivable in the numerator. The denominator remains the same as the current ratio and includes all current liabilities. This ratio considers only assets that are cash or easily convertible to cash. A company is typically considered favorable when its quick ratio is between 1.1 and 1.5. This indicates that it has enough cash to cover its liabilities.

Debt-To-Equity Ratio

This ratio calculates how the growth of the company is financed through debt. In this instance, a person usually considers a ratio of 2.0 or lower favorable. As the ratio grows, it could signal that the company is financing its growth through too much debt and could become unsustainable. 

Working Capital Turnover Ratio

A company uses the capital turnover ratio to identify its asset efficiency in generating sales. The company calculates the ratio by dividing the difference between current assets and current liabilities by its sales. For each dollar of working capital, a higher ratio generates more sales. However, a ratio above 30.0 could signal that the company may need more working capital to continue to grow in the future. 

Equity Turnover Ratio

A company’s equity turnover ratio identifies how efficiently it generates sales using its assets. The company calculates its sales-to-equity ratio by dividing its sales figure by its total equity. Usually, a ratio above 15.0 may signal a company will have trouble growing in the future.

More Information

DiSanto, Priest & Co.’s experienced team of professionals can assist you in calculating, analyzing, and improving your financial ratios with a focus on maintaining your company’s health. For more information, call us at (401) 921-2000 or fill out our contact form.

Solar panel installation is at an all-time high across the country. Are you among the many individuals and businesses thinking about an installation? This federal solar tax credit guide was created to explain how you can take advantage of these tax credits.

When installed in 2023 or later, the federal solar tax credit has increased to 30% of the total cost of the system, with no set maximum amount. This 30% federal solar tax credit will be available until 2032 for individuals and 2033 for businesses. After that time, the percentage is set to decrease. The tax credit is a dollar-for-dollar reduction of the tax that you owe.

If your federal solar tax credit is larger than the tax you owe, you may carry the credit forward. If you are deciding to install solar panels on your home or business, now may be the time to call your tax advisor.

Considerations for Individuals

To qualify for a federal solar tax credit on a system installed on your residence, you must ensure that you own the system and that it’s new or being used for the first time. If you lease the solar panel system, you will not qualify for the federal solar tax credit. Other important requirements include the location of the residence and the date the system was completed.

The residence must be in the United States, owned by the individual claiming the tax credit, and meet certain requirements to be considered as completed in the year the tax credit is claimed. There are also other qualifying situations such as purchasing interests in an off-site community solar project.

In addition, you should take care to only include approved costs in your computation of the system’s total cost as some fees should not be included in the total. Excluded costs typically include things like support beams and shingles but some exceptions can be explored if certain criteria exist.

Considerations for Businesses

There’s more than one option for a federal solar tax credit when installing a solar system on your commercial property. Businesses have the option to use either the Investment Tax Credit (ITC) or the Production Tax Credit (PTC).

• ITC: allows you to take 30% of the total cost of the system in the year the system is completed.
• PTC: allows a tax credit of 2.75 cents per kilowatt hour for electricity generated by the solar panels for the first ten years of the system’s operation.

Generally, both the ITC and PTC cannot be claimed for the same property. Also, the tax credit may be larger than the tax due for some businesses.

For projects placed in service in 2023 or later, the tax credit may be carried forward 22 years or back three years. The rates for both tax credits are set to change in 2033. If you’re installing a large system and expect to have a lot of sunlight, the PTC may be your best option. If you incur high installation costs or qualify for other tax credits, the ITC may be a better fit.

In addition, there are other bonus tax credits that businesses may be able to benefit from as well. 

Federal Solar Tax Credit: Get More Details

If you have any questions about federal solar tax credits that weren’t outlined in this guide, we’re here to help. You may call us at (401) 921-2000 or fill out our contact form.

In a move that will be significant to many Massachusetts residents and businesses, Massachusetts Governor Maura Healey signed into law a tax package that will provide benefits of up to $1 billion. The bill was signed into law on October 4, 2023 by the governor, and the package includes provisions that will impact both income taxes and estate taxes. This third, and final, post focuses on changes to Massachusetts corporate income tax. For a deeper understanding of other aspects of this bill, read our previous posts on its impact on Estate Taxes and Individual Income Taxes.

Currently, Massachusetts requires most companies to use a 3-factor apportionment formula of property, payroll, and a double-weighted sales factor. The exception to this apportionment method is in relation to manufacturing companies, qualifying defense contractors, and mutual fund service corporations in which these companies must use a single sales factor apportionment method. The new tax bill in Massachusetts states that starting for tax years that end on or after January 1, 2025, all companies will adopt a single sales factor apportionment method. It is important to note that companies that manufacture in Massachusetts will need to continue to qualify as a manufacturing company under M.G.L CH. 62 s. 42B in order to continue claiming certain exemptions for property and sales/use tax and also the ability to claim the investment tax credit.

For companies that are based in Massachusetts with all or most of their property and payroll located in the state, this could be seen as beneficial in the fact that it could lower their overall apportionment percentage. Consequently, companies that are required to file a tax return in Massachusetts that only have sales in the state would generally experience a higher apportionment percentage than previous years with all facts considered the same. The Massachusetts government hopes that this change will remove a disincentive for companies to hire and place their headquarters in Massachusetts and attract more businesses to move to the state.

DiSanto, Priest & Co. can help you with corporate tax planning and navigate the tax opportunities created by the Massachusetts Tax Bill of 2023. Call us at (401) 921-2000 or submit our contact form to get started.

In a move that will be significant to many Massachusetts residents and businesses, Massachusetts Governor Maura Healey signed into law on October 4, 2023, a tax package that will provide benefits of up to $1 billion. The bill includes provisions that will impact both income taxes and estate taxes. This post highlights significant individual income tax changes. For a deeper understanding of other aspects of this bill, read our posts on its impact on Estate Taxes and Corporate Taxes.

Individuals who are required to file a return in Massachusetts will be subject to tax cuts involving decreases in certain tax rates, increases in deductions, and increases in tax credits that will reduce their income tax liability.

The reductions in certain tax rates include a 3.5% reduction in the tax rate on short-term capital gains, reducing the current rate from 12% to 8.5%. This reduction will go into effect for tax years starting on or after January 1, 2023. However, if a taxpayer is subject to the new Massachusetts “millionaires tax”, the 4% surtax will increase the short-term capital gain rate up to 12.5%.

Also, starting in 2024, married couples must file their Massachusetts tax returns using the same filing status (joint or separate) as their federal returns. This is to eliminate a loophole for taxpayers to separate their Massachusetts return without impacting their federal filings and potentially avoid the 4% millionaire surtax.

Further provisions of the new tax bill will increase various allowable deductions and tax credits for individuals. Most notably, the residents in Massachusetts who pay rent for their primary residence will witness an increase in the cap of the rental deduction from $3,000 to $4,000 starting in 2023. The government estimates that this increase will support around 800,000 renters in the state. Among the increases in tax credits for Massachusetts residents include enhanced benefits to the Earned Income tax credit and the Child and Dependent tax credit. Massachusetts individuals who receive an Earned Income tax credit on their federal return will now be allowed to take 40% of the federal credit as opposed to the previously allowed 30%. The Child and Dependent tax credit for Massachusetts residents will also be increased per dependent from $180 to $310 in 2023 and $440 in taxable years after that.

DiSanto, Priest & Co. can help you navigate the tax opportunities created by the Massachusetts Tax Bill of 2023. Call us at (401) 921-2000 or submit our contact form to get started.

In a move that will be significant to many Massachusetts residents and businesses, Massachusetts Governor Maura Healey signed into law on October 4, 2023 a tax package that will provide benefits of up to $1 billion. The bill includes provisions that will impact both income taxes and estate taxes. This post highlights estate tax implications and benefits. For a deeper understanding of other aspects of this bill, read our posts on its impact on Individual Income Taxes and Corporate Taxes.

Previously, Massachusetts estates that were valued at up to $1 million were exempt from the Massachusetts estate tax. In comparison to other states, this was tied for the lowest exemption threshold for states that impose an estate tax. There are currently many states that do not tax estates at all and those that do typically have exemption thresholds significantly higher than $1 million.

The new tax bill raises the threshold for estates to be taxed from the current $1 million threshold up to $2 million. In addition, the bill changes the current estate tax structure from a cliff test to a true exemption.  Under the prior cliff test, if an estate exceeded $1 million the entire estate was taxable. By switching to a $2 million exemption, estates are now only taxed on the value of the estate above the $2 million exemption.

The changes are retroactive and apply to estates of residents who die on or after January 1, 2023, and continue forward for the foreseeable future as the $2 million exemption is not indexed for inflation.

For illustration purposes, below is an example of the impact of the new estate laws:

• Estates of Massachusetts residents with a value of $2 million who died before January 1, 2023, would be subject to a Massachusetts estate tax equaling $103,920.
• Estates of Massachusetts residents with a value of $2 million who die on or after January 1, 2023, would NOT be subject to a Massachusetts estate tax.

Although the threshold has doubled, it is still low in comparison to most other states. This new exemption threshold ranks 3rd lowest in the country above only Oregon and Rhode Island.

DiSanto, Priest & Co. can help you with estate tax planning and navigate the tax opportunities created by the Massachusetts Tax Bill of 2023. Call us at (401) 921-2000 or submit our contact form to get started.