Provisions Expiring in 2019
As 2019 comes to an end, some changes to tax provisions are taking effect on January 1, 2020 while some are ending entirely. A few common ones to look out for are alimony deductions and income, phaseout for plug-in vehicle credits, and the expiration of the work opportunity tax credit.
Alimony is generally no longer deductible by the payor spouse nor includable as gross income by recipient spouse if the divorce or written separation agreement was executed after December 31, 2018. Alimony paid pursuant to a divorce agreement in place prior to December 31, 2018 is grandfathered in and remains deductible for the payor and included as gross income for the recipient, if provided for in the agreement. This is also true for agreements originally executed before December 31, 2018 but modified after that date. However, if the modified agreement expressly provides that the Tax Cut and Jobs Act (TCJA) applies to the modification, the agreement loses the grandfathered status.
Internal Revenue Code §30D allows a credit for new qualified plug-in electric drive vehicles purchased after December 31, 2010. The maximum credit allowed is $7,500. A phaseout of the credit begins with respect to specific manufacturers’ vehicles when that manufacturer has sold a total of 200,000 new qualified plug-in electric drive motor vehicles after December 31, 2009. In the second quarter of 2018, Tesla became the first automaker to deliver 200,000 plug-in vehicles. Therefore, any taxpayer that was delivered their vehicle in the first half of 2019 are eligible for a maximum credit of $3,750. Any Tesla vehicles delivered in the second half of 2019 are eligible for a phased-out credit of $1,875. Any Tesla vehicles delivered after December 31, 2019 is ineligible for the credit. General Motors delivered 200,000 vehicles at the end of 2018, so taxpayers that had a delivery of the Chevy Volt or Chevy Bolt after the first quarter of 2019 will face similar reduced tax credits.
The Work Opportunity Tax Credit (WOTC) is a federal tax credit available to employers for hiring individuals from certain targeted groups such as Qualified IV-A Recipients, Qualified Veterans, Ex-Felons, Designated Community Residents, Vocational Rehabilitation Referral, Summer Youth Employee, Supplemental Nutrition Assistance Program (SNAP) Recipient, Supplemental Security Income (SSI) Recipient, Long-term Family Assistance Recipient, and Qualified Long-Term Unemployment Recipient. However, beginning January 1, 2020 this credit will no longer be available. The WOTC is claimed on Form 5884 after the employees are screened (Form 8850) for eligibility. Then the employer and applicant must complete Department of Labor Form 9061 for verification. The credit is calculated based on the wages, number of hours worked, and number of years employed (qualified first and second years only). The maximum amount of credit is based on the different categories of targeted group.
If you have any questions about the above, feel free to reach out to your DKC representative for more information.