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THE INFLATION REDUCTION ACT
- The Inflation Reduction Act has been signed into law. So, what does that mean for you? Maybe not much, but there might be some opportunities. First, to share some wise words: only consider expenditures if it still makes sense without any tax benefit.
- Most residential energy credits (IRC Sec. 25C) like insulation, windows, doors and energy efficient furnaces are extended through the end of 2032 instead of expiring at the end of 2021 (Sec.13301)
- The 2022-2032 home solar/wind credit (IRC Sec. 25D)has been increased back to 30% for 2022 and extended for 10 years at that rate (Sec.13302).
- A new credit equal to 30% (max $4,000) would apply for buyers of electric vehicles that are more than 2 years old. It must be bought from a dealer and be the 1st resale. The credit is reconciled when filing your individual tax return. (Sec.13401).
- The $7,500 maximum credit is back, but only if certain US component thresholds are met and it applies at the point of sale. According to the Congressional Budget Office only 30% of electric vehicles would qualify under the stringent thresholds of US material component requirements. (Sec. 13401)
THE IRS & YOUR BUSINESS TAXES
- NEW for 2021 - S-Corp and Partnership returns may have to file forms K-2 & K-3
- Designed to identify foreign income activity
- To date, foreign income incomes include investments, such as in mutual funds that also have foreign taxes withheld.
- A business may not directly have foreign income activity; even if individual partners or members do, then the business is required to file these forms.
- May hold up electronic filing for certain businesses, if applicable. See IRS schedule.
- NEW for 2021 - S-Corp and LLC Owners will have a new Form 7203 to provide stock and debt basis information
- If you receive K-1s from these entities be sure to have this provided to you, and expect delays from these entities to provide these with your K-1 for 2021
- 2022 Standard Mileage rates:
- 58.5 cents per mile driven for business use from 01-01-2022 thru 06/30/2022,
- 62.5 cents per mile driven for business use from 07-01-2022 thru 12/31/2022,
- 18 cents per mile driven for medical, or moving purposes for qualified active-duty members of the Armed Forces, from 01-01-2022 thru 06/30/2022,
- 22 cents per mile driven for medical, or moving purposes for qualified active-duty members of the Armed Forces, from 07-01-2022 thru 12/31/2022, and
- 14 cents per mile driven in service of charitable organizations; this rate is set by statute and sadly remains unchanged
THE IRS & YOUR INDIVIDUAL TAXES
- NEW for 2021 - Up from $300 last year, now you can add $600 for your standard deduction for qualified cash charitable donations made if you don't itemize.
- NEW for 2021 - Dependent care credit phaseout dramatically increased to over $400,000 AND the credit is refundable in 2021, up to $8,000 for one dependent or up to $16,000 for more than one dependent
- Check your account
- To help ensure your records match what is being reported to the IRS you should review your taxpayer account
- Married individuals will have their separate accounts even if they file a joint return
ARIZONA & YOUR TAXES
- Reminder to keep your records a little longer - Arizona has a 4-year statute of limitations (the IRS is 3 years)
- UPDATE - Surcharge from Prop 208 has been struck down. You do not need to amend your AZ return if already been filed and it impacted you. AZDOR will automatically adjust and refund you.
- NEW for 2021 - Education Savings Deductions are now Per Beneficiary
- Contributions to college savings plans are limited to $2,000 per taxpayer, or $4,000 per married filing a joint tax return
- NEW for 2021 the contribution is $2,000 per *beneficiary* ($4,000 per beneficiary for a married filing joint return)
- If you plan to pay your Arizona taxes with Charitable Tax Credits you have until 04/18/2022 to make donations and still apply them to 2021
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Contact our office to address your specific accounting, tax or other planning needs. This website is a valuable resource. Material is intended to provide accurate, current and general information.