Tax Topics

2023 Tax Law Changes

• Standard Deduction amounts were increased for 2023 to account for inflation. Married couples filing jointly get $27,700 ($25,900 for 2022), plus $1,500 for each spouse age 65 or older ($1,450 for 2022). Singles can claim a $13,850 standard deduction ($12,950 for 2022) — $15,700 if they're at least 65 years old ($14,700 for 2022). Head-of-household filers get $20,800 for their standard deduction ($19,400 for 2022), plus an additional $1,850 once they reach age 65 ($1,750 for 2022). Blind people can tack on an extra $1,500 to their standard deduction ($1,400 for 2022). That jumps to $1,850 if they're unmarried and not a surviving spouse ($1,750 for 2022). IRS inflation adjustments.

• Residential clean energy credit. If you install an alternative energy system in your home that relies on a renewable energy source, such as solar, wind, geothermal, or fuel cell technology, this credit is for you. Solar panels, solar electric equipment, solar-powered water heaters, and wind turbines are eligible for the credit. And beginning this year, 2023, the credit also applies to battery storage technology with a capacity of at least three-kilowatt hours. The size of the credit is 30% of the cost of the equipment and installation for renewable energy systems. The full credit goes through 2032. After that, it drops to 26% in 2033 and 22% in 2034, before it expires in 2035
• Energy-effficient home improvement credit. The tax credit for installing energy-efficient windows, doors, etc. in your home has been completely revamped, beginning this year. For 2022, the credit applied to 10% of the cost of certain types of insulation, plus external windows, doors, and skylights. It also included the cost of electric heat pumps and water heaters, some central air-conditioning systems, and similar energy-saving investments. There was a lifetime credit limitation of $500. And the credit was capped for many items. This credit is now bigger and better for 2023 through 2032. First, the credit percentage increases to 30% of the cost of certain types of insulation, boilers, air-conditioning systems, windows, doors, etc. added to your residence. Second, the $500 lifetime limit is replaced with a $1,200 annual limit. This $1,200 annual limit is lowered to $500 in the aggregate for exterior doors and $600 for exterior windows and skylights and other items. The annual limit increases to $2,000 for a biomass stove or hot water boiler, or an electric or natural gas heat pump put in the home. Third, you can also get a credit of up to $150 for the cost of a home energy audit.
• Clean vehicle credit. The tax credit for buying an electric vehicle has been revamped by last year’s Inflation Reduction Act (including a name change from the electric vehicle tax credit to the clean vehicle credit). For 2023 through 2032, the maximum tax break remains $7,500 for buying a new EV. But the factors for figuring the credit are new. To be eligible for the full $7,500 credit, EVs put in use after April 17, 2023, must meet a critical minerals requirement and a battery component rule. If only one factor is met, then the credit is capped at $3,750. Eligibility for the full $7,500 credit for EVs put in use before April 18 is based on the vehicle’s battery capacity. Also, the final assembly of the EV must take place in North America. This last rule applies to all EVs first placed in service after Aug. 16, 2022. The manufacturer sales threshold limit is gone. Under pre-2023 rules, some popular car brands didn’t qualify for the credit because they started to phase out for vehicles manufactured by a car company that sold over 200,000 EVs in the U.S. This limitation has been removed for electric vehicles purchased in 2023 and later. But two new rules could prevent you from claiming the tax break if you buy a new EV. First, the manufacturer’s suggested retail price can’t exceed $55,000 for sedans and $80,000 for vans, SUVs, and pickup trucks. An EV’s classification as a sedan a van, SUV, or pickup truck is based on the vehicle’s fuel economy label on the window sticker and the EPA size class published at the website Fueleconomy.gov. Second, there is an income limit. You can’t claim the credit for purchasing a new EV if your modified adjusted gross income exceeds $300,000 for joint filers, $225,000 for head-of-household filers, or $150,000 for single filers. Used EVs bought from a dealer qualify for a smaller credit, equal to the lesser of $4,000 or 30% of the sales price. The credit isn’t available if your modified AGI is more than $150,000 for joint filers, $112,500 for head-of-household filers, or $75,000 for single filers. Additional IRS info on the clean vehicle credit.

• Standard mileage rates. The 2023 standard mileage rate for business driving rose to 65.5¢ a mile. The mileage allowance for medical travel and military moves also increased to 22¢ a mile in 2023. However, the charitable driving rate stayed put at 14¢ a mile.

Please don't hesitate to reach out if you have additional questions!

Key Tax Changes for Tax Year 2022

• New rules about 1099-K reporting forms. New under the American Resue Plan, beginning with tax year 2022, the Form 1099-K (Payment Card and Third Party Network Transactions) reporting requirements have changed. You will receive a Form 1099-K if you had more than $600 in payments for goods and services processed (formerly 200 transactions and/or $20,000) .
• The Infrastructure Bill, signed into law in March 2022, changed reporting requirements of digital assets such as cryptocurrency. Beginning tax year 2023, brokers will be required to report crypto transactions to the IRS. If you sold, traded, or received crypto as a gift, the IRS still requires you to report your crypto sales, regardless if you receive a 1099 from the broker.
• The Earned Income Tax Credit, Child Tax Credit, and Child and Dependent Care Credit have reverted back to pre-American Rescue Plan tax law.
• The Educator Expense deduction has increased for inflation from $250 to $300 and can still include personal protective equipment (PPE) such as gloves, sanitizer, masks, air purifiers, etc.
• The Inflation Reduction Act of 2022 was signed on September 20, 2022. It expands the federal income tax credits available to incentivize the purchase of electric vehicles (EVs). These changes generally apply to EVs placed in service after December 31, 2022 through December 31, 2032. The maximum credit amount is $7,500 (some EVs may be less). No manufacturer phaseout and Pre-Owned EVs may now qualify with restrictions. For Tax Year 2022, EVs must be assembled in North America for vehicles purchased on or after August 17, 2022. This bill has also increased the Residential Solar Credit: 30% for 2022-2032, 26% for 2033, 22% for 2034.

  For additional information about the Inflation Reduction Act of 2022 visit the IRS Website.

Please don't hesitate to reach out if you have additional questions!

The Coronavirus Response and Relief Supplemental Appropriations Act of 2021

• The Coronavirus Response and Relief Supplemental Appropriations Act of 2021 was signed into law on December 27, 2020. This is a $900 billion relief package aimed to deliver a second round of financial relief to individuals, families, and businesses.
• Stimulus Payments: A second wave of up to $600 for eligible individuals, and an additional $600 for each dependent child under 17.
• Extended Unemployment: Unemployment payments will increase by $300 per week and the benefits will be extended until March 14, 2021. Self-employed individuals will also be able to collect under the Pandemic Unemployment Assistance (PUA).
• Special Lookback for Earned Income Tax Credit and the Child Tax Credit: This rule will allow lower income individuals to use their earned income from 2019 to determine their Earned Income Tax Credit and the refundable portion of the Child Tax Credit for 2020.
• Expanded Paycheck Protection Program (PPP) for Small Businesses: Businesses with 300 or fewer employees that have experienced 25% revenue loss in any 2020 quarter would be eligible under the COVID-19 Emergency Relief Package. Borrowers who previously obtained a PPP loan under the CARES Act may be eligible for a second loan. Not all borrowers will qualify. The new revision in this Act allows additional expenses that were previously not allowable. Expenses paid by PPP loan proceeds to be deducted as usual, notwithstanding the exclusion of the loan amount from taxable income.
• HSA and FSA: The bill allows taxpayers to roll over unused amounts in their health and dependent care flexible spending arrangements from 2020 to 2021 and from 2021 to 2022.
• Charitable Contributions: This bill extends and modifies the $300 charitable deduction for nonitemizers for 2021, and increases the maximum amount that may be deducted to $600 for married couples filing jointly.
• Tax Extenders: This bill includes the permanent passage and multi-year extension of many additional tax provisions. Including, but not limited to: Reduction in the medical expense deduction floor (7.5%) - permanent, Mortgage Insurance premiums treated as qualified residence interest - 1 year extension, exclusion from gross income of discharge of qualified principal residence indebtedness - 5 year extension.

For additional tax impact and further information you can always check the IRS Website.

Please don't hesitate to reach out if you have additional questions!

The Coronavirus Aid, Relief and Economic Security Act (The CARES Act)

• The Coronavirus Aid, Relief and Economic Security Act (The CARES Act), was signed into law in March 2020. This was a $2 trillion stimulus package designed to provide financial relief to individuals, families, and businesses.
• Economic Impact Payments: Stimulus checks – up to $1,200 for individuals and an additional $500 for each qualifying child under 17.
• Increase In Unemployment Payments: Unemployment payments were increased by $600 weekly for 4 months through July 31, and the bill also includes those who were previously not eligible for unemployment. This includes part-time employees, freelancers, independent contractors, gig workers, and the self-employed.
• Penalty Waived for Early Retirement Withdrawal: The 10% early withdrawal penalty may be waived on up to $100k of retirement funds withdrawn. You can also opt to pay the income tax spread over 3 years, and you may recontribute the funds to an eligible retirement plan within three years without regard to that year’s cap on contribution.
• Delay of Social Security: Employers, including the self-employed, can delay the payment of the employer portion of the Social Security payroll tax for the remainder of the year and pay back the liability over the next two years.

• For additional tax impact and further information you can always check the IRS Website.

Economic Payment Information

You may be eligible to receive a Payment if you: 

• Are a U.S. citizen or U.S. resident alien;
• Cannot be claimed as a dependent on someone else’s return; 
• Have a Social Security number (SSN) that is valid for employment (valid SSN); and
• Exception: If either spouse is a member of the U.S. Armed Forces at any time during the taxable year, then only one spouse needs to have a valid SSN
• Have adjusted gross income below an amount based on your filing status and the number of your qualifying children.

Additional information about eligibility for the Payment can be found on the IRS Website for Economic Payments.

Please don't hesitate to reach out if you have additional questions!

IRS extends April 15 Tax Deadline Due to Coronavirus

On March 20, 2020 the Secretary of Treasury announced that the federal tax filing deadline will be changed to July 15, 2020. State deadlines may vary, California is conforming. Taxpayers who are due a refund are encouraged to file now as the IRS expects to continue to process refunds as normal. The Treasury and IRS also announced the deferment of federal tax payments, interest and penalty free, for 90 days, until July 15. The deferment also applies to tax year 2020 estimated tax payments previously due on April 15, 2020.

You can read more about the IRS and Coronavirus Tax Relief here https://www.irs.gov/coronavirus

SECURE Act

The Setting Every Community Up for Retirement Enhancement Act, better known as the SECURE Act, was signed into law on Friday, December 20. The SECURE Act is one of the most dynamic changes to retirement legislation since the Pension Protection Act of 2006, and addresses a wide variety of retirement planning topics. This will have many changes starting in 2020- More to come on this topic in the next coming weeks

Taxpayer Certainty and Disaster Tax Relief Act of 2019

Late December, the Taxpayer Certainty and Disaster Tax Relief Act of 2019 — which provides tax relief for millions of Americans — was passed by Congress and signed into law by the President. The law extends many already expired provisions that provide tax relief and support for families and individuals, special tax relief for certain disaster victims and the extension of energy-efficient tax credits.

Extended Tax Relief for Individuals and Families

Mortgage Debt Exclusion – If you experienced a foreclosure, short sale or loan modification, you may still be able to exclude the amount of debt forgiven on your principal residence on your 2019 taxes up to $2,000,000.

Mortgage Insurance Premiums – Private Mortgage Insurance may be deductible again depending on your income and other factors in your tax return.

Tuition and Fees Deduction – This education tax benefit is an above-the-line tax deduction for higher education expenses.

Medical Expense Deduction – The medical expense deduction threshold was set to go back up to 10% in 2019, but the new provision extends the lower 2017 and 2018 threshold of 7.5%.

Incentives for Energy Efficiency

Credit for Nonbusiness Energy Property – If you made energy-efficient improvements to your home (including the addition of energy-saving roofs, windows, skylights, doors, etc.), you will still be able to claim the nonbusiness energy property credit for 10 percent of amounts paid for qualified energy efficiency improvements up to a lifetime cap of $500 or in fixed dollar amounts ranging from $50 to $300 for energy-efficient property such as furnaces, boilers, biomass stoves, heat pumps, water heaters, central air conditioners and circulating fans.

Credit for New Qualified Fuel Cell Motor Vehicles – If you purchased a new qualified fuel cell vehicle, you may receive a credit between $4,000 and $40,000 depending on the weight of your vehicle.

Tax Relief for Disaster Victims

The disaster relief portion of the law provides special tax relief for individuals and businesses in Presidentially-declared disaster areas occurring between January 1, 2018 and 30 days following the date of enactment of the law.