Tax Provision Update - Secure Act 2.0

“The Hardest thing in the world to understand is the income tax” – Albert Einstein

If Albert Einstein, one of the greatest physicists of the 20th century, can’t understand it,  how is the average taxpayer supposed to understand? That’s why MPK Advisors & CPAs exists, is to help you, the taxpayer, understand and make the best decisions possible with the information we have obtained over years of research and study.

“According to Public law, dated 6/23/22, the U.S. tax Code is 6,871 pages. When you include the regulations and the official tax guidance, the number of pages raises to approximately 75,000. That would take the average reader 14 weeks to finish”. – Iris Reading, LLC

Knowing these complexities of the tax law, we want to regularly provide our clients with a summary and overview of new tax provisions as they become available so that you can make the best financial decisions for yourself, business, or family. One such law that recently passed late last year was the Secure Act 2.0, among a few other changes.

The SECURE Act 2.0 was signed, December 29, 2022 and has many new provisions the majority of them concerning retirement. In fact over 90 of these provisions begin in 2023 . A few of the key provisions are:

Employer Retirement Plan Provisions- Just A few

  • Mandatory participation for new employees in 401K and 403b plans.
  • Roth accounts will be encouraged under employer plans
  • Part-time employees will be encouraged to participate in employer plans.
  • Employer could offer “de minimis financial incentives” for employee to participate in retirement plans.
  • Required minimum distributions from retirement plans won’t start until age 73 for individuals turning 72 during 2023 or later.
  • Catch-up Contributions, currently at $6500 for employer plans will increase for those age 60-63 to $10,000 and IRA catch up contributions will be indexed for cost of living after 2023

Other Retirement Provisions

  • Consider making a Qualified Charitable Distribution if your over 70 ½, which could allow you to exclude up to $100,000 annually.
  • 529 Plans , up to the maximum Roth contributions allowed, can be rolled over into a Roth IRA if it has been established 15 years or more and you qualify for a ROTH IRA contribution.

Tax Credits-Highlights

  • For residential Clean Energy – Effective for 2023, allows 30% of the cost of qualified improvements made and replaces the lifetime limitation to a $1200 per year amounts.
  • Clean vehicle credit – eliminate the manufacturer limitations and allows a credit on qualified plug-in electric vehicles (EV’s) up to $7500.

Other Changes from the prior year

  • Beginning with 2022 the Nonitemizers can no longer write off on page 1 of Form 1040 up to $300/$600 in cash donations.
  • The IRS’s interest rates on overdue taxes will be charged at 7% and any refunds will pay an interest rate of 7% also.
  • For businesses the 100% bonus depreciation has been reduced to 80% of close for the year of acquisition.
  • Increase in Health Savings Deductions contributions increase to $7,750 for family coverage.
  • The standard deduction for Married couples increases to $27,700 with an additional $1,500 per spouse over 65.

There are many more provision in the SECURE 2.0 act that you, as a taxpayer, may qualify for so if you think that some of these provision or others may apply to you or may apply in the future please be sure to let us know. Remember failure to plan is planning to fail. Part of the services MPK Advisors & CPA’s offer in addition to our tax preparation, and advisory services is tax planning and projections so let us help you plan for your tax future.

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