Sales Tax Rates - January 1, 2024

In an effort to keep you updated on the financial factors that affect your business operations, please find below the latest sales tax rates for various cities within San Diego County:

• Carlsbad: 7.750%

• Chula Vista: 8.750%

• Coronado: 7.750%

• Del Mar: 8.750%

• El Cajon: 8.250%

• Encinitas: 7.750%

• Escondido: 7.750%

• Imperial Beach: 8.750%

• La Mesa: 8.500%

• Lemon Grove: 7.750%

• National City: 8.750%

• Oceanside: 8.250%

• Poway: 7.750%

• San Diego (City): 7.750%

• San Diego County (unincorporated areas): 7.750%

• San Marcos: 7.750%

• Santee: 7.750%

• Solana Beach: 8.750%

• Vista: 8.250%

These rates are crucial for correctly calculating the sales tax on goods and services sold within these jurisdictions. It is important to apply the correct sales tax rate for the specific city where your business is located or where sales transactions occur.

Should you have any questions regarding these tax rates or need assistance with sales tax compliance, please do not hesitate to reach out to us.

2024 Tax Season Updates - Part II

Continuing from our previous communication, here is the second part of the summary of the income tax changes for 2023. These updates are critical for your tax planning and compliance:

Qualifying Surviving Spouse Filing Status:

• A taxpayer may use this status for two years following the year of their spouse's death, subject to meeting five specific criteria.

Terminology Change for Virtual Transactions:

• The term "virtual currency" on Form 1040 has been replaced with "digital assets," which are defined as digital representations of value on a cryptographically-secured ledger.

• All filers of Forms 1040, 1040-SR, or 1040-NR must answer a question regarding transactions in digital assets.

Taxation of Digital Assets:

• When receiving digital assets as payment for services, the income reported should be the U.S. dollar value of the digital assets at the time they are received.

Required Minimum Distributions (RMDs) Age Increase:

• RMDs must begin at age 73 for individuals who reach age 72 after the year 2022.

RMD Excise Tax Reduction:

• The excise tax for failing to take an RMD is decreased from 50% to 25%, with a further reduction to 10% for IRAs if the failure is corrected promptly.

Energy Efficient Home Improvement Credit:

• A nonrefundable credit of up to 30%, capped at $1,200 annually, is available for specified energy-efficient home improvements.

• There are limits on credit amounts for windows, skylights, doors, and energy audits.

Clean Energy Credits:

• A credit for 30% of expenditures, up to $2,000, for the purchase of specific heat pump equipment and biomass stoves and boilers installed from January 1, 2023, until December 31, 2032.

• Up to a $7,500 credit is available for new clean vehicles, depending on specific battery materials and components, subject to vehicle MSRP and taxpayer's modified adjusted gross income (MAGI).

Credit for Used Clean Vehicles:

• A nonrefundable credit for purchasing a used clean vehicle is available, either $4,000 or 30% of the sale price (up to a $25,000 sale price), whichever is less. Eligibility is subject to the taxpayer's MAGI.

Please assess how these changes might affect your tax situation. Our team is here to help you understand these updates and provide the necessary guidance. Feel free to contact us with any questions or for further assistance.

2024 Tax Season Updates - Part I

As we navigate through the 2023 tax year, it's important to stay informed about the various tax changes that could affect your tax planning and filings. Below is a simplified summary of the key income tax updates for this year:

Education Savings Bond Program:

• For married couples filing jointly, the income phase-out begins at $137,800.

• For single filers, qualifying widow(er)s, and heads of household, the phase-out starts at $91,850.

Qualified Long-Term Care Insurance Deduction Limits:

• Age 40 or younger: $480

• Age 41 to 50: $890

• Age 51 to 60: $1,790

• Age 61 to 70: $4,770

• Age over 70: $5,960

Long-Term Care Per Diem Limitation:

• The 2023 per diem limit for long-term care insurance benefits is $420.

Social Security Taxable Earnings:

• For 2023, the earnings limit subject to Social Security tax is $160,200.

Saver's Credit AGI Limits:

• Married filing jointly: $73,000 AGI limit

• Head of Household: $54,750 AGI limit

• All other filers: $36,500 AGI limit

Health FSA Contributions:

• Maximum contribution for 2023 is $3,050.

• Up to $610 of the unused amount may be carried over, if your plan allows.

Affordable Care Act (ACA) Subsidies Expansion:

• Under the ARPA, individual subsidies for ACA plans are increased, extending benefits to more taxpayers, including those previously ineligible due to income.

Small Business Health Insurance Premium Tax Credit:

• Employers with fewer than 25 full-time equivalent employees (FTEs) paying average wages under $61,400 may be eligible for a tax credit.

ACA Shared Responsibility Penalties:

• For large employers not offering health insurance: $2,880 annual penalty ($240 per month).

• For large employers that do offer insurance, but employees get a tax credit through an exchange: $4,320 annual penalty ($360 per month).

Health Savings Account (HSA) Limits:

• Minimum deductible for self-only High Deductible Health Plan (HDHP): $1,500; max out-of-pocket: $7,500; max contribution: $3,850.

• Minimum deductible for family HDHP: $3,000; max out-of-pocket: $15,000; max contribution: $7,750.

• Additional catch-up contribution for those 55 and older: $1,000.

2023 Standard Mileage Rates:

• Business travel: 65.5 cents per mile.

• Charitable service: 14 cents per mile.

• Medical travel: 22 cents per mile.

• If using the business rate, the basis reduction rate is 28 cents per mile.

Please review these changes carefully to understand how they may impact your financial planning for the current tax year. If you have any questions or need further assistance, do not hesitate to reach out.

California State Disability Insurance Tax Change

Please be aware of a significant update in the payroll tax structure that affects all California employees starting in 2024.

California State Disability Insurance (SDI) Payroll Tax Change:

• Traditionally, the California SDI payroll tax of 1.1%, which funds the state’s disability insurance program, was applied to wages up to a cap of $153,164.

• Starting in 2024, California has removed this wage cap, and the 1.1% payroll tax will now be applicable to all wage income without limit.

• Consequently, the highest individual income tax rate on wage income in California will rise to 14.4%.

It is crucial for all employers and employees to take note of this change as it will impact net income and payroll processing. If you have any questions regarding how this change affects your payroll operations or if you require assistance in adjusting to the new legislation, please contact us.

Beneficial Ownership Reporting Requirements

BOI Reporting Overview: Beneficial Ownership Information (BOI) is the identification of individuals who have direct or indirect ownership or control over a company. As of March 24, 2023, corporations and LLCs are required to disclose BOI to the U.S. Department of the Treasury. This requirement comes under the Corporate Transparency Act, passed in 2021 to thwart the misuse of business entities by malefactors.

Reporting Timeline: Entities formed or registered to conduct business before January 1, 2024, have until January 1, 2025, to submit their initial BOI report to the Financial Crimes Enforcement Network (FinCEN).

Entities Required to Report:

• Domestic Reporting Companies: U.S.-based corporations, LLCs, or similar entities established through state-level registration.

• Foreign Reporting Companies: Foreign entities, including corporations and LLCs registered to do business in the U.S. through state-level filing.

Exemptions: Several entities are exempt from BOI reporting, including but not limited to publicly traded companies, certain nonprofits, and large operational companies. Notably, there are 23 categories of exemptions:

• Securities reporting issuers

• Banks, credit unions, and related institutions

• Money services businesses, brokers or dealers in securities

• Investment companies and advisers, including venture capital fund advisers

• Insurance companies and state-licensed insurance producers

• Entities registered under the Commodity Exchange Act

• Accounting firms and public utilities

• Pooled investment vehicles, tax-exempt entities

• Large operating companies and their subsidiaries

• Inactive entities

Definition of Beneficial Owner: A beneficial owner is someone who either possess substantial control over, or owns at least 25% of, a reporting company's ownership interests.

It is essential for all entities to review whether they fall under this reporting requirement or qualify for an exemption. Should you need further clarification or assistance in complying with the BOI reporting, please don’t hesitate to reach out.