2023 has once again proven to be a challenging economic year for taxpayers. The divided Congress has struggled to pass any kind of meaningful legislation as it relates to taxation in The United States. Discussions have begun around extending or modifying the expiring provisions of The Tax Cuts and Jobs Act (TCJA). Many of the provisions that taxpayers have benefited from will sunset (expire) at the conclusion of 2025.
Some of the key items include the top tax rate for individual taxpayers reverting to 39.6%, the Section 199A 20% Qualified Business Income Deduction ending, and the removal of the $10,000 State and Local tax deduction cap. The standard deduction will be halved in most cases and the popular Child Tax Credit will be reduced. AMT exemptions and phase outs will revert to pre-TCJA amounts which will likely place more taxpayers into AMT territory beginning in 2026.
Some of the notable changes and ongoing developments are highlighted below.
Energy Efficient Home Improvement Credit
Qualified energy efficiency improvements to your residency allows for a 30% tax credit. Central air conditioners, natural gas, propane, or oil water heaters, Solar installation, etc. can qualify.
Other improvements like exterior doors, windows insulation materials qualify for a smaller annual credit.There are certain energy efficiency standards that must be satisfied to be eligible for the credit. Exterior doors, for example, must meet Energy Star requirements.
Electric Vehicle Tax Credit
If you purchase and place in service a new plug in electric vehicle (EV) in 2023 or after, you might qualify for a $7,500 tax credit. The vehicle must be purchased for your own use and used primarily in the U.S. to qualify. Your modified adjusted gross income must not exceed $300,000 for married couples and $150,000 for single taxpayers. This is a nonrefundable credit.
Starting in January of 2024, purchasers of qualified EV’s will be able to take advantage of the credit up front instead of waiting until they file their tax returns to get the benefit. The car dealership will help facilitate the benefit of the tax credit in the form of a $7,500 write off of the purchase price of the vehicle. Those purchasing an EV would need to attest that they meet the income limits and that
they’re purchasing the vehicle for personal use. Provisions will be in place to ensure that dealerships, and dealers can participate in this offering if they’re current on their own tax liabilities. This point of sale rebate system would help taxpayers see the fruits of their purchase upfront instead of waiting to file their tax returns.
The American Rescue Plan Act of 2021 lowered the filing threshold for Form 1099-K which relates to payment card and third party network transactions, to $600 (previously $20,000). Taxpayers should prepare themselves for the receipt of these tax forms if they received payments for items sold, services provided, or property rented. Ticket exchange and resale sites will issue these forms to the seller and will also be reported to the IRS.
The Corporate Transparency Act
Starting January 1, 2024, the Corporate Transparency Act takes effect and will mandate all new companies formed or qualified to do business in the United States to report beneficial ownership information to FinCEN. Existing companies will have until the end of 2024 to complete this reporting requirement but new companies will have 30 days from the date of formation to report this. It is strongly recommended that business owners seek legal council to determine their filing requirements. This filing requirement is a separate and distinct filing from a business or individual tax return.
Despite the onslaught of tax changes, economic uncertainties, and erratic market conditions, Lang Faylor Chomo & Company is committed to providing excellent service to our clients. As we approach 2024 and tax filing season, we encourage you to reach out to us with any questions you may have so we can be of best service to you.
Lang Faylor Chomo & Company