payments of remuneration for services to $2,000 per calendar year (up from $600). The threshold will be indexed for inflation in calendar years after 2026. To comply with the no-tax-on-overtime provision, dealer employers will be required to separately state the qualified overtime compensation paid to employees on their annual Form W-2. INDIVIDUAL TAX PROVISION The bill makes a variety of provisions from the Tax Cuts and Jobs Act (TCJA) permanent: • Reduced individual tax rates • Standard Deduction: Effective January 1, 2025, the standard deduction for single/MFS is $15,750, Head of Household is $23,625, and MFJ is $31,500. • Personal Exemptions: permanently zero • Section 199A Qualified Business Income Deduction: permanently 20% • Mortgage Interest Limitation: interest is limited to the first $750,000 of qualified home acquisition debt. Home Equity Line of Credit interest remains non-deductible SALT Deduction The bill temporarily increased the maximum state and local tax deduction for tax years 2025 through 2029 to $40,000 (indexed for inflation for 2026 through 2029). The deduction will phase out as the taxpayers’ Modified Adjusted Gross Income (MAGI) is over $500,000. The minimum deduction amount will be $10,000. After 2029, the maximum deduction drops back down to $10,000. No Tax on Overtime The bill provides a temporary deduction of $12,500 ($25,000 MFJ) for qualified overtime compensation received. The deduction will be phased out when Modified AGI exceeds $150,000 ($300,000 MFJ). The overtime pay must be separately stated on the individual’s W-2 form. Car Loan Interest Deduction For years 2025 through 2028, the bill allows a deduction of up to $10,000 per year for interest paid on a qualifying car loan. This deduction applies whether the individual itemizes or takes the standard deduction. Dealerships may see an increase in car sales resulting from this allowable deduction. To qualify, (1) the vehicle must be brand new (original use starts with the taxpayer), (2) the loan must be a first-lien car loan (leases are not eligible) incurred after December 31, 2024, (3) the vehicle must be for personal use, and (4) the vehicle must have its final assembly in the United States. The deduction will be phased out for taxpayers with a Modified AGI of $100,000 ($200,000 MFJ). Alternative Minimum Tax (AMT) Exemption The bill makes the higher exemption amounts of $88,100 for single filers and $137,000 for joint filers under TCJA permanent in 2026. The income thresholds for phaseout of the exemption revert to pre-TCJA levels of $500,000 ($1 million MFJ). The income thresholds will be indexed for inflation after 2026. The phaseout is increased to 50% of the amount by which a taxpayer’s AMT income exceeds the applicable exemption phaseout threshold. Dealership owners and other high-income taxpayers may be subject to the Alternative Minimum Tax and should consult with tax advisors to plan for this. Charitable Deductions The final bill includes provisions related to cash donations to qualified charitable organizations. • For taxpayers who do not itemize, the bill provides a permanent deduction beginning in 2025 of $1,000 for single filers or $2,000 MFJ. Donations to donor-advised funds are not eligible for this deduction • For taxpayers who itemize, the bill limits the cash charitable deduction available to those cash contributions that exceed 0.5% of the taxpayer’s contribution base (60% of the taxpayer’s adjusted gross income) ESTATE AND GIFT TAX PROVISION The bill permanently increased the estate tax exemption and lifetime gift exemption amounts to $15 million for single filers and $30 million for joint filers in 2026. After 2026, the exemption will be indexed for inflation. While this article has touched on many of the tax provisions included in the “One Big Beautiful Bill,” dealership businesses and owners may be affected by many other tax provisions. The bill is welcome relief for auto dealers, as many of the sunsetting TCJA items have been permanently extended. Please contact your Withum Tax Advisor if you have any additional questions or would like to discuss how the “One Big Beautiful Bill” affects your business or personal income taxes. Kristin Reese-Scalabrino is a Tax Manager at Withum and can be reached at kreesescalabrino@withum.com or by phone at (407) 308-3450. 19 NEW JERSEY auto retailer
RkJQdWJsaXNoZXIy MTg3NDExNQ==