INTRODUCTION
This document,1 prepared by the staff of the Joint Committee on Taxation (“Joint Committee staff”), provides a summary of the present-law Federal tax system as in effect for 2024. The current Federal tax system has four main elements: (1) an income tax on individuals, estates, trusts, and corporations (which consists of both a “regular” income tax and, in the case of individuals and certain large corporations, an alternative minimum tax);2 (2) payroll taxes on wages (and corresponding taxes on self-employment income) to finance certain social insurance programs; (3) estate, gift, and generation-skipping transfer taxes; and (4) excise taxes on selected goods and services. This document provides a broad overview of each of these elements.

Several aspects of the Internal Revenue Code of 1986 (the “Code”) are subject to change over time. For example, some dollar amounts and income thresholds are indexed for inflation, including the standard deduction, tax rate brackets, and the annual gift tax exclusion. In general, the Internal Revenue Service (“IRS”) adjusts these numbers annually and publishes the inflation adjusted amounts in effect for taxable years beginning in a calendar year before the beginning of such calendar year. Where applicable, this document generally includes dollar amounts in effect for 20243 and notes whether dollar amounts are indexed for inflation.4

In addition, many provisions in the Federal tax laws are temporary or have parameters that change over time according to the statute. For simplicity, this document describes the Federal tax laws in effect for 2024, as of the date of publication, and generally does not include references to provisions as they may be in effect for future years or to termination dates for expiring provisions.5

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According to an article in The Kiplinger Report, the five most expensive US States to live in are California, Hawaii, New York, New Jersey, and the District of Columbia.

California

Not surprisingly, California takes first place as the most expensive state for millionaires. The Golden State recently raised its top income tax bracket by 1.1%, from 13.3% to 14.4%.  But California was the most expensive state for high earners last year, too, before the increase took effect.

Hawaii

Hawaii is an expensive state for high earners to live in. The top income tax rate is 11%. And notably, you don’t need to be a millionaire for the state to tax some of your income at that rate.

• Single and married filing separately taxpayers will pay 11% on more than $200,000 of taxable income.
• Heads of household pay the 11% tax rate on more than $300,000 of taxable income.
• Joint filers pay 11% on more than $400,000 of income.

New York

It’s no surprise that New York taxes high earners at one of the highest rates in the U.S. The top income tax bracket in the state is 10.9%. However, only taxpayers with taxable incomes greater than $25 million fall into this bracket. If your taxable income falls between $1 million and $25 million, you can expect to be subject to a tax rate of anywhere between 6.85% and 10.3%, which is still high compared to most other states.

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What is Section 174?

Section 174 of the Internal Revenue Code now defines the treatment of Specified Research or Experimental (SRE) expenditures. Section 174 was amended by the Tax Cuts and Jobs Act of 2017 to require amortization of SRE expenditures paid or incurred for tax years beginning after December 31st, 2021. Section 174 now requires taxpayers to amortize SRE expenditures over five years for domestic research or over fifteen years for foreign research. Both direct and indirect SRE expenditures must be amortized under Section 174.

What is Amortization?

Under Section 174, amortization refers to spreading SRE expenditures over specific periods instead of deducting the entire amount of the expenditures in the year they were incurred. Amortizing the expenditures over several years will cause an immediate increase in a company’s short-term income tax liability. This short-term tax liability increase is something that companies are looking to mitigate.

Is There a Difference Between Section 174 and Section 41 (R&D Tax Credit)?

YES! Section 174 and 41 are NOT the same thing.

Section 174 includes a company’s direct SRE expenditures, which can include payroll, supplies, and patent costs. Section 174 also encompasses a company’s indirect SRE expenditures, such rent, utilities, overhead, and other items in a cause-and-effect relationship with the direct SRE expenditures.

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Multi-State Tax Consulting

In this day and age, nearly every company conducts business across state lines. Are you aware of all the additional taxes and fees you may be liable for?

We assist companies with state sales tax and income tax matters. As companies expand their operations and send salespeople across the country, or sell to consumers in other states via the internet, they create into nexus (or taxable presence) and have to think about filing in other states. That’s where Miles Consulting Group comes in.

We help companies answer questions on multi-state tax compliance:

• Where do you have nexus creating activities?
• What are the rules? What are next steps?
• When was nexus created? When should you begin filing?
• How much retroactive exposure has been created? Can we help you reduce it?

As state tax rules change, we help our clients address these questions by bridging the gap between your business and complex state tax laws.

We are often asked these three questions:

1.  Why Is A Nexus Review Important?
2.  Which Activities Cause State Tax Issues?
3. Multi-State Tax Consulting

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Cost Segregation is a highly beneficial and widely accepted tax strategy utilized by owners of commercial and residential rental property to accelerate depreciation deductions, defer taxes, and improve cash flow. A quality study provides the appropriate documentation needed to support the correct classification of depreciable assets related to a building and exterior improvements. It is important to note that a Cost Segregation study does not create new deductions, it simply increases deductions in the early years of ownership. This front-loading of depreciation allows the taxpayer to take advantage of the time value of money.

From a tax perspective, Cost Segregation should be considered routine for all property owners who own or manage real estate. Not only will a study support accelerated depreciation by reclassifying eligible assets into shorter lives it but can provide valuable data to support important tax-centric initiatives during the holding period of the property.

Life Cycle Of Real Estate

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The Supreme Court issued its long-awaited opinion in Connelly v. United States (No. 23-146) on whether a corporation’s obligation to apply the amount of proceeds from corporate-owned life insurance to fund a mandatory redemption of stock on the death of a shareholder reduces the value of the corporate assets (i.e., offsets the insurance proceeds received by the corporation) when valuing the stock in the estate of the deceased shareholder. In a resounding taxpayer defeat by unanimous opinion, the Supreme Court said “no” and resolved a split between the Eighth Circuit in Connelly v. United States, 70 F.4d 412 (2023), and the Eleventh Circuit in Estate of Blount v. Commissioner, 87 TCM 1303 (2004), aff’d in part and rev’d in part, 428 F.3d 1338 (2005).

This fall’s Tax Planning Forum programs will discuss Connelly and a workaround that easily can be implemented in many closely held business situations by using a partnership to own the insurance, rather than the corporation, and thereby not increase the value of a decedent’s stock for estate tax valuation purposes by the corporation’s receipt of insurance proceeds. We will discuss how the partnership should be structured to meet the goals of the shareholders, which mirrors what would have occurred from an economic perspective had the policy been owned by the corporation. We also will delve into how to transfer insurance policies out of a corporation and avoid the impact of the §101(a)(2) transfer-for-value rules that can cause taxation of the life insurance proceeds, if those rules are not carefully navigated. (more…)

Enterprise 720 Quarterly Excise Tax E-File Now Available

Don’t wait until the IRS mandates e-file for forms 720 and 8849. Act now to stay ahead of the game.

Visit and Contact us Today at https://akorefederal.com

Still, filing your Excise Tax Returns through paper? It’s time to switch to digital e-filing and eliminate paper returns. The IRS offers an e-filing option for excise tax forms 720 and 8849, and only Akore Federal Excise Tax E-File Software has the enterprise-level solution.

TaxConnections is excited to introduce AKORE Federal Tax Software by Richard Carrier (CEO):

• IRS Authorized: Akore is the only e-file Provider with enterprise-level security for excise tax e-filing.
• Top-rated Security: Backed by an AKORE Trust Document, ensuring critical security checks and reliability.
• e-File 2024 Q3 and Q4: Get e-File ready now with introductory pricing through 12/31/24.

Flexible E-filing Solutions: Akore Federal provides an e-filing service tailored for everyone—individual tax experts, CPA firms handling hundreds of returns, and large corporate filers. No matter the volume, Akore has you covered.

Join the expanding number of companies utilizing Akore’s Federal e-Filing service to not only expedite your refunds and streamline your tax processes, but also to experience the peace of mind that comes with choosing certified, secure excise tax software. Akore’s existing clients are primarily large enterprises that demand professional support and trusted security certification.

Visit and Contact us Today at https://akorefederal.com

The Supreme Court issued its long-awaited opinion in Connelly v. United States (No. 23-146) on whether a corporation’s obligation to apply the amount of proceeds from corporate-owned life insurance to fund a mandatory redemption of stock on the death of a shareholder reduces the value of the corporate assets (i.e., offsets the insurance proceeds received by the corporation) when valuing the stock in the estate of the deceased shareholder. In a resounding taxpayer defeat by unanimous opinion, the Supreme Court said “no” and resolved a split between the Eighth Circuit in Connelly v. United States, 70 F.4d 412 (2023), and the Eleventh Circuit in Estate of Blount v. Commissioner, 87 TCM 1303 (2004), aff’d in part and rev’d in part, 428 F.3d 1338 (2005).

This fall’s Tax Planning Forum programs will discuss Connelly and a workaround that easily can be implemented in many closely held business situations by using a partnership to own the insurance, rather than the corporation, and thereby not increase the value of a decedent’s stock for estate tax valuation purposes by the corporation’s receipt of insurance proceeds. We will discuss how the partnership should be structured to meet the goals of the shareholders, which mirrors what would have occurred from an economic perspective had the policy been owned by the corporation. We also will delve into how to transfer insurance policies out of a corporation and avoid the impact of the §101(a)(2) transfer-for-value rules that can cause taxation of the life insurance proceeds, if those rules are not carefully navigated. (more…)