What’s New

New rules for COVID-related employee retention credit (ERC). A COVID-ERC promoter has to follow the due diligence requirements to claim the employee retention credit for a taxpayer. A promoter that fails to properly follow the requirements will be subject to a penalty. See Penalty for improper claims for the employee retention credit (ERC) for more details. Micro-captive reportable transactions. The IRS issued Regulations section 1.6011-10 to identify transactions that are the same as, or substantially similar to, certain micro-captive transactions, as listed transactions effective January 14, 2025. The IRS also issued Regulations section 1.6011-11 to identify certain other micro-captive transactions as transactions of interest. Both are reportable transactions under Regulations section 1.6011-4. Certain relief of penalties for failure to disclose is outlined in Notice 2025-24. Deduction for state and local taxes (SALT). For tax year 2025, the overall limit on the deduction for state and local taxes has been increased to $40,000 ($20,000 if married filing separately). In the prior year, the limit on the deduction was $10,000 ($5,000 if married filing separately). See State and local income taxes in chapter 3.