John S. Crosby, CPA

For 2021, the Social Security tax wage cap will be $142,800, and Social Security and Supplemental Security Income (SSI) benefits will increase by 1.3 percent. These changes reflect cost-of-living adjustments to account for inflation.

The IRS has adopted previously issued proposed regulations ( REG-106808-19) dealing with the 100 percent bonus depreciation deduction. In addition, some clarifying changes have been made to previously issued final regulations ( T.D. 9874). Changes to the proposed and earlier final regulations are largely in response to various comments submitted by practitioners, and generally relate to:

• the definition of qualified used property;
• the election to claim bonus depreciation on components acquired or self-constructed after September 27, 2017, for larger self-constructed property for which manufacture, construction, or production began before September 28, 2017;
• application of the mid-quarter convention;
• clarifications to the definition of qualified improvement property, predecessor, and class of property; and
• clarifications to the rules for consolidated groups
  The rules for consolidated groups have also been moved from Proposed Reg. §1.168(k)-2(b)(3)(v) to new Reg. §1.1502-68.

The IRS has released final regulations clarifying that the following deductions allowed to an estate or non-grantor trust are not miscellaneous itemized deductions:

• costs paid or incurred in connection with the administration of an estate or non-grantor trust that would not have been incurred if the property were not held in the estate or trust;
• the personal exemption of an estate or non-grantor trust;
• the distribution deduction for trusts distributing current income; and
• the distribution deduction for estates and trusts accumulating income.

The IRS has released the 2020-2021 special per diem rates. Taxpayers use the per diem rates to substantiate the amount of ordinary and necessary business expenses incurred while traveling away from home. These special per diem rates include the special transportation industry meal and incidental expenses (M&IEs) rates, the rate for the incidental expenses only deduction, and the rates and list of high-cost localities for purposes of the high-low substantiation method. Taxpayers using the rates and list of high-cost localities provided in the guidance must comply with Rev. Proc. 2019-48, I.R.B. 2019-51, 1390.

The IRS has released guidance in the form of questions and answers with respect to certain provisions of the Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act), and the Bipartisan American Miners Act of 2019 (Miners Act).

The IRS has released final regulations that address the interaction of the $10,000/$5,000 cap on the state and local tax (SALT) deduction and charitable contributions. The regulations include:

• a safe harbor for individuals who have any portion of a charitable deduction disallowed due to the receipt of SALT benefits;
• a safe harbor for business entities to deduct certain payments made to a charitable organization in exchange for SALT benefits; and
• application of the quid pro quo principle under Code Sec. 170 to benefits received or expected to be received by the donor from a third party.

The final rules generally adopt the proposed regulations issued in December 2019 ( NPRM REG-107431-19) with minor clarifications.

The IRS has issued final regulations regarding the limitation for the business interest expense deduction under Code Sec. 163(j), including recent legislative amendments made for the 2019 and 2020 tax years. Also, a safe harbor has been proposed allowing taxpayers managing or operating residential living facilities to qualify as a real property trade or business for purposes of the limitation. In addition, new proposed regulations are provided for a number of different areas.

The IRS has reminded taxpayers that the Coronavirus Aid, Relief, and Economic Security (CARES) Act ( P.L. 116-136) can provide favorable tax treatment for withdrawals from retirement plans and Individual Retirement Accounts (IRAs). Under the CARES Act, individuals eligible for coronavirus-related relief may be able to withdraw up to $100,000 from IRAs or workplace retirement plans before December 31, 2020, if their plans allow. In addition to IRAs, this relief applies to 401(k) plans, 403(b) plans, profit-sharing plans and others.

Proposed qualified opportunity zone regulations issued on October 29, 2018 ( REG-115420-18) and May 1, 2019 ( REG-120186-18) under Code Sec. 1400Z-2 have been finalized with modifications. The regulations. which were issued in a 550 page document, are comprehensive.

On December 20, President Donald Trump signed the bipartisan, year-end government spending and tax package, just hours before federal funding was set to expire. Trump's signature on the over 2,000-page spending package avoided a government shutdown.

Year-End Tax Package
The Further Consolidated Appropriations Act, 2020, (HR 1865), logs just over 700 pages and serves as only half of the government spending package for fiscal year 2020, which runs through September 30. Most notably, HR 1865 serves as the legislative vehicle for a year-end tax package, which carries a costly $426 billion price tag over a 10-year budget window, according to the nonpartisan Joint Committee on Taxation (JCT), JCX-54R-19.