Carol McAtee's Blog

With the April 15 federal tax filing deadline well behind us, many who have filed their 2023 tax returns have breathed a sigh of relief. But since the tax code changes frequently – and never gets any less complicated – it’s worthwhile to be aware of a few changes coming down the road in tax year 2024 and future years.

IRS Free Filing

For tax year 2023, the IRS rolled out a limited pilot of its new, free Direct File program. For 2023, it was accessible only in 12 participating states and limited to taxpayers with relatively simple tax returns:
• Income limited to Form W-2, Social Security or unemployment
• Interest income of $1,500 or less
• Standard deduction rather than itemized deductions

The IRS will expand the rollout of the program in subsequent tax years.

Electric Vehicle Credit

Taxpayers who purchased an electric car may get up to $7,000 in a credit in tax year 2023 (and continuing through 2032), but the eligibility rules have become tighter. Limitations include income limits and requirements that the vehicle meet other criteria such as having final assembly in North America.

Starting in tax year 2024, electric vehicle purchasers can transfer the credit to the car dealerships for an upfront discount, rather than waiting until they file their 2024 tax returns. This will appear as a reduction in the purchase price of the vehicle.

Energy Efficiency Home Improvement

Starting in tax year 2023, taxpayers can claim up to $1,200 per year in certain home improvements such as exterior doors, windows and insulation. In addition, a credit of up to $2,000 is available for new water heaters, heat pumps and boilers.

The Residential Clean Energy Credit is available for items like solar panels, solar water heaters or wind turbines, up to 30% of qualified costs.

Child Credit

The US Congress is debating an increase in the child tax credit, currently $2,000 for each qualifying dependent. If an increase is enacted in the middle of the tax year, the additional credit would be available as a retroactive payment. Taxpayers who have already filed would not have to file an amended tax return to realize the increased credit.

Non-W2 Income

Freelancers, independent contractors and small businesses have long been required to report any income to the IRS over $400. Online payment processors such as Venmo, Paypal, eBay or Airbnb are required to report the income of people selling goods and services, but at the current time only when their activity exceeds 200 transactions and $20,000 in payment annually.

That will likely change for the 2024 tax year: The IRS plans to lower the threshold to $5,000 annually, with no transaction minimum. The threshold could be lowered in subsequent years and eventually drop to a minimum of $600.

State and Local Tax (SALT) Deduction

The maximum deduction for state and local taxes paid is currently $10,000, through tax year 2025. However, some states provide a work-around, allowing taxpayers to pay the taxes from a pass-through entity such as an S-corporation or partnership. Then the entity owners can deduct the entity’s taxes on their personal tax returns. This work-around is complicated and not available in all states, requiring the skill of a well-experienced tax professional.

Cryptocurrency

Taxpayers are required to report any profits (capital gains) or losses from the sale of investments such as stocks or bonds. Brokerage firms must prepare tax forms (1099-B and 1099-DIV) to report these.

Up to now, brokerage firms have not been required to report transactions involving cryptocurrency or other digital assets. The IRS has proposed a new requirement to report these transactions with a new tax form – Form 1099-DA.

Regardless of the how brokerage firms report, taxpayers are still required to report any capital gain or loss when they sell digital currency.


If you have questions about this featured topic or other accounting and tax related topics, please do not hesitate to contact us at 727-327-1999 OR [email protected].
ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.

The Corporate Transparency Act passed in 2021, creating a new requirement to report Beneficial Ownership Information (BOI) about the individuals who ultimately own or control a company, is part of the U.S. government’s efforts to address financial crimes. Starting January of 2024, this report will be required for many domestic and foreign business entities.

Anonymous Companies

Before this reporting requirement, companies were not required to list owners by name. These anonymous companies (also called shell companies) were sometimes used to disguise the identity of their true owner—the person (or people) who ultimately control or profit from the company. These people are also known as the “beneficial owners.”

Often these companies have few or no employees at all, and do not conduct any real business. The owners could include those involved in illegal activities – including embezzlers, arms traffickers, and drug dealers. By leaving their names off the forms they fill out, they created anonymous companies that are perfect for hiding illicit cash.

By creating a centralized database of beneficial ownership information, the government intends to address critical vulnerabilities in our financial system and address illicit finances.

Reporting Requirements

Beneficial ownership information reporting is not an annual requirement. A report only needs to be submitted once, unless the filer needs to update or correct information.

Filing is simple, secure and free of charge. Companies that are required to comply (“reporting companies”) must file their initial reports by the following deadlines:

• Existing companies, created or registered to do business in the US before January 1, 2024 must file by January 1, 2025.
• New companies created or registered to do business in the United States in 2024 have 90 calendar days to file after receiving actual or public notice that their company’s creation or registration is effective.
• New companies created or registered on or after January 1, 2025, will only have 30 calendar days to file.

Generally, reporting companies must provide four pieces of information about each beneficial owner:
• Name
• Date of birth
• Address
• Identifying number, issuer and image of either a non-expired U.S. driver’s license, a non-expired U.S. passport, or a non-expired identification document issued by a State, local government, or Indian tribe. If none of those documents exist, a non-expired foreign passport can be used.

Beneficial owners include any individuals who exercise substantial control over a reporting company or owns at least 25% of an ownership interest in the company.

The reporting entity must also submit certain information about the company , such as its legal name, trade name, address, jurisdiction of formation, and tax ID number.

Reporting companies include corporations, limited liability companies (LLCs), or other entities created or registered by filing documents with the secretary of state or similar state office. Note that sole proprietorships, trusts, and other entities that do not typically require the filing of a formal document with the secretary of state, are generally not considered a reporting company and will not have a filing requirement.

Certain entities, including publicly traded companies and certain large companies may be exempt from reporting.

In addition, reporting companies created on or after January 1, 2024, are required to submit information about the individuals who formed the company (“company applicants”). Company applicants are the individuals who filed the document that created or first registered the reporting company and the individual who was responsible for the direction or control over the filing.

Filing must be done electronically and only through FinCEN’s secure website. Additional Information can be found at fincen.gov/boi-faqs

Failure to file the Beneficial Ownership Information Report, when required, could result in civil penalties (of up to $500 for each day that the violation continues), criminal penalties (of up to two years imprisonment) and a large fine (of up to $10,000).


Please contact us for more information about Beneficial Ownership Information Reporting at 727-327-1999 OR [email protected].

ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.

Gambling income is any money or prizes that you earn from games of chance or wagers on events, including racetracks, raffles, the casino, or the lottery. Gambling income is fully taxable and must be reported on your federal tax return, specifically as other income.

Cash and Non-Cash Winnings

You are required to report any gambling winnings as income, either cash or prizes. For example, if you win a car in a charity raffle, you are required to report the fair market value of that car as income.

Tax on Winnings

Unlike many other forms of income, gambling winnings may be subject to federal income tax withholding at a flat rate of 24%. Gambling income is taxed whether tax is withheld or not.

Reporting of Winnings

Gambling establishments report winnings on a W-2G form (similar to a W-2 for wages) that is given to the winner and sent to the IRS. In general, the Form W-2G is issued if winnings exceed certain thresholds, including $1,200 or more from slot machines or bingo, $1,500 or more from Keno games or $5,000 or more from poker tournaments.

Gambling Losses

Gambling losses can be tax-deductible, but only up to the amount of winnings you report as income. Gambling losses can be reported under “Other Itemized Deductions” on Schedule A (Itemized Deductions) of Form 1040. If you take the Standard Deduction rather than itemizing, you cannot deduct any gambling losses.

You should keep copies of your losing tickets or win/loss statements, since you should be able to prove every gambling loss that you deduct.

Gambling losses can only be reported specifically as losses, and not as reductions in your winnings. For example, if you buy a $20 raffle ticket and win a $500 prize, you must report $500 on Form 1040, not $480.

Professional Gamblers

The information above applies only to gambling winnings and losses for casual gamblers. If you consider yourself a professional gambler, you must file a Schedule C (Form 1040) for your gambling business.

The IRS has strict rules in place for who can qualify as a professional gambler. And unlike casual gamblers, professionals must pay self-employment tax on winnings.


Please contact us for more information about the rules for reporting gambling income and losses, and for assistance in preparing your return at 727-327-1999 OR [email protected].

ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.

In the U.S., income taxes are collected on an ongoing basis. For many of us, this means that an employer pays federal and state taxes on our behalf by withholding a certain amount from each paycheck.

But if you earn income as a freelancer or receive certain types of non-wage income, you may need to pay what the IRS calls “estimated quarterly taxes.” This includes income from self-employment, interest, dividends, alimony and rent, as well as gains from the sale of assets, prizes and awards.

You also may have to pay estimated tax if the amount of income tax being withheld from your salary, pension, or other income is not enough.

In all cases, penalties due to underpayment of tax payments due may be incurred.

Determining If Estimated Payments Are Required

In general, most taxpayers can avoid penalties if they owe less than $1,000 in tax after subtracting their withholdings and credits, or if they paid at least 90 percent of the tax for the current year, or 100 (110 for higher income individuals) percent of the tax shown on the return for the prior year, whichever is smaller.

If you are filing as a sole proprietor, partner, S corporation shareholder, and/or a self-employed individual, you generally have to make estimated tax payments if you expect to owe tax of $1,000 or more when you file your return. If you are filing as a corporation, you generally have to make estimated tax payments for your corporation if you expect it to owe tax of $500 or more when you file its return.

If you receive salaries and wages and you had a tax liability for the prior year, you may have to pay estimated tax for the current year. There are special rules for certain taxpayers such as farmers or fishermen and certain taxpayers with higher incomes.

Adjusting Withholdings

You can avoid the possibility of paying estimated tax or penalties by asking your employer to withhold more tax from your earnings. To do this, you would file a new Form W-4 with your employer, entering the additional amount you want your employer to withhold.

Schedule for Estimated Tax Payments

For estimated tax purposes, the year is divided into four payment periods, each with a specific payment due date. For the 2024 tax year, these dates are:
April 15, 2024
June 17, 2024
September 16, 2024
January 15, 2025

If you do not pay enough by the due date of each payment period you may be charged a penalty even if you are due a refund when you file your tax return.

Calculating Estimated Tax

Calculating estimated tax requires consideration of expected adjusted gross income, taxable income, taxes, deductions and credits for the year. Your CPA or tax preparer can calculate what your estimated tax will be for each quarterly period, and how much you will need to pay for that period.

How to Pay

CPAs or tax preparers can provide you with paper voucher slips to send for each payment. In addition, individuals and businesses can pay their estimated federal taxes using the Electronic Federal Tax Payment System (EFTPS) or via online direct pay, offered at no charge by the IRS.


Please contact us for more information about estimated tax returns, and for assistance in preparing your return at 727-327-1999 OR [email protected].

ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.

The answer is yes, with two essential conditions that have to be met. Details of what expenses may be deductible are below, but these two basic conditions apply:

ONE: Deductions must be Itemized

First, you must itemize deductions using a Schedule A rather than taking the standard deduction. The standard deduction works best for the majority of taxpayers. For tax year 2024 it is $14,600 for single tax filers and $29,200 for married taxpayers filing jointly.

For many taxpayers, the standard deduction typically exceeds the total deductions you would get from mortgage interest, property taxes, charitable deductions, medical expenses and other deductions that could otherwise be itemized. However, if the taxpayer, spouse or dependent has significantly high medical expenses in a particular tax year, it might make sense to itemize.

TWO: Deductions must be for Qualified Medical Expenses

The IRS defines medical care expenses as “payments for the diagnosis, cure, mitigation, treatment, or prevention of disease, or payments for treatments affecting any structure or function of the body.”

The key words are “disease” and “treatment.” Thus, expenses that may contribute to your overall health, such as special health foods, supplements or a gym membership or trainer, are not deductible. However, if you are incurring these expenses as part of treatment plan for a disease, such as obesity, then they may be deductible.

Medical expenses that are usually deductible include the following:
• Payments for fees to doctors, dentists, surgeons, chiropractors, psychiatrists, psychologists and nontraditional medical practitioners
• Payments to participate in a weight-loss program for a specific disease or diseases diagnosed by a physician including obesity. (Note: this does not include ordinary payments for diet food items or payments for your gym or health club dues)
• Payments for insulin and for drugs that require a prescription for their use.

How Much Is Deductible?

It’s important to note that you can only deduct the amount of your total medical expenses that exceeds 7.5% of your adjusted gross income (AGI). For instance, if your AGI is $50,000, you can only deduct medical expenses over $3,750 ($50,000 x 7.5%).


If you have questions about this featured topic or other accounting and tax related topics, please do not hesitate to contact us at 727-327-1999 OR [email protected].
ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.

The IRS recently announced that nearly a million American taxpayers – approximately 940,000 – who have not yet filed tax returns for tax year 2020 may be due to get a refund. The IRS estimates typical refunds for these returns as over $900.

Filing Deadline

Taxpayers who have not yet filed a tax year 2020 return have until May 17, 2024 to file and potentially claim a refund. After that date, any refunds for unfiled 2020 returns revert to the Treasury Department.

In general, taxpayers have exactly three years to file a return and claim refunds. But due to the pandemic, the IRS extended the typical April 15 filing deadline to May 17 and thus the 3-year window runs to May 17.

Unclaimed Refunds

The unclaimed refunds include both full-time and part-time workers; some may have neglected to file a return because they did not meet the income threshold for being required to file. Tax year 2020 included the recovery rebate credits which are refundable even for taxpayers who had little or no income in that year.

The earned income credit based on family income and size is another refundable credit – worth as much as $6,600 in 2020.

Documents Needed

You may need to get past W-2 wage statements from employers and interest statements from banks. If you are unable to get these, you can order a “wage and income” transcript from the IRS which shows the income figures submitted to them from these sources.

Filing 2020 Tax Returns

The 2020 returns must be filed on paper and mailed to the IRS whether you use a self-submitting tax software or a professional tax preparer. A few exceptions to the May 17 deadline may apply, such as military service or physical/mental impairments that affect the taxpayer’s ability to manage their financial affairs.

Your CPA or professional tax preparer can help you determine if you would benefit from filing a 2020 tax return or are required to file one.


If you have questions about this featured topic or other accounting and tax related topics, please do not hesitate to contact us at 727-327-1999 OR [email protected].

ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.

You have until midnight on the April 15 Tax Day deadline to either electronically file a tax return or have a paper return postmarked by April 15. If you miss that deadline, your tax return will technically be late and possibly subject to penalties and interest.

However, you can electronically request an automatic, six-month tax extension by filing a Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return. This moves your filing deadline to Oct. 15, 2024.

Unfortunately, the extension to file is not an extension to pay. The IRS requires you to pay an estimate of what you owe by the regular April deadline. As long as you pay an estimated amount that’s close to what you owe, you won’t be subject to fines or penalties if you file your return and pay any remaining tax liability by Oct. 15, 2024. For the IRS, that means your estimated payment needs to be at least 90% of your total tax liability.

Expecting a Refund

If you’re due a refund, there’s no IRS penalty for filing your return late, but filing more quickly means you will get your money back sooner. Remember, however, although you might not be hit with a penalty for filing late, you probably still need to file a return. The IRS has a strict definition of who has to file a tax return based on annual income, among other factors.

You have three years to file your 2023 tax return before the IRS turns your tax refund over to the Treasury and your money is gone forever. Your tax refund might be delayed by filing late, but you should still expect to receive your money in four to six weeks after filing.

Owing Money to the IRS

However, if you owe on your taxes, you don’t want to wait — penalties and interest can pile up quickly. There are two basic penalties that the IRS charges for filing taxes late when you owe money: a failure-to-file penalty and a failure-to-pay penalty. On top of that, you’ll also have to pay interest on the amount you owe.

• The failure-to-file penalty is generally 5% of the amount you owe for each month or part of a month that your return is late, with a maximum penalty of 25%. If your return is more than 60 days late, the minimum penalty is $435 or the balance of your taxes due, if less than that.

• The failure-to-pay penalty is usually calculated at 0.5% of any taxes owed that aren’t paid by the deadline. The IRS again charges the penalty for each month or part of a month that your payment is late, with a maximum 25% penalty total.

• Interest on late taxes fluctuates and is determined for individuals by adding 3% to the short-term federal interest rate. That rate is adjusted quarterly, and interest is compounded daily.

State Tax Return Deadlines

State income tax deadlines are typically the same as the federal tax deadline, but some exceptions exist. Check with your tax practitioner if you have questions about the deadlines for specific states.

Paying the IRS

If you can’t pay your tax bill in full, you can set up an installment payment plan with the IRS. If you can pay off your tax debt within 180 days, the IRS will let you apply for a short-term payment plan at no cost, although you’ll still accrue penalties and interest until your debt is paid off.

Check on Your Refund

Taxpayers expecting a refund can use the Where’s My Refund? tool on the IRS web site www.IR.GOV. (Remember that it is DOT GOV, not DOT COM.) To use the tool, taxpayers need to enter their Social Security number, filing status and exact refund amount expected.

Your CPA can help you with all of the above issues.

If you have questions about this featured topic or other accounting and tax related topics, please do not hesitate to contact us at 727-327-1999 OR [email protected].

ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.

The Internal Revenue is making a number of changes for tax year 2024, largely as annual inflation adjustments. Looking ahead, some planning in advance can help get you ready to realize the most advantageous tax outcome.

Tax Brackets for 2024

The IRS put in place higher limits for federal income tax brackets for tax year 2024, which means Americans will likely pay a little less in taxes. Brackets are increasing by about 5.4% for both individual and married filers. The top tax rate remains at 37% for 2024, and that starts for single taxpayers earning $609,350 of more.

The IRS made the changes to avoid “bracket creep,” when inflation pushes people into higher tax brackets without additional purchasing power.

Standard Deduction

The 2024 tax year standard deduction for married couples filing jointly will be $29,200, a $1,500 increase from $27,700 for the 2023 tax year. For single taxpayers, the standard deduction is $14,600, an increase of $750 from the 2023 deduction of $13,850. For heads of households, the standard deduction will be $21,900, an increase of $1,100 from the amount for tax year 2023.

IRA, 401(k) Contribution

For tax year 2024, taxpayers can contribute up to $23,000 into 401(k), 403(b) and most 457 plans, $500 more than the $22,500 contribution limit for 2023. The limit on annual contributions to an IRA will increases to $7,000, up from $6,500 for 2023.

The IRA catch-up contribution limit for individuals aged 50 and over remains at $1,000 for 2024. For 401(k) and most other plans, the catch-up contribution limit for employees 50 and over is $7,500 for 2024.

Flexible Spending Account Contributions

The IRS raised the limit for 2024 contributions to health flexible spending arrangements to $3,200, up from $3,050 for 2023. The dollar limitation for employee salary reductions for contributions to health flexible spending arrangements increases to $3,200. For cafeteria plans that permit the carryover of unused amounts, the maximum carryover amount is $640, an increase of $30 from taxable years beginning in 2023.

Child Tax Credit

For the 2024 tax year, the child tax credit remains at up to $2,000, but the refundable portion of the credit increases to $1,700, which equates to a possible additional refund of $100 per qualifying child. It’s important to note that income limits apply to these benefits

The maximum credit allowed for adoptions for tax year 2024 is the amount of qualified adoption expenses up to $16,810, increased from $15,950 for 2023.

Electric Vehicle Credit Change

Some models of electric vehicles will lose eligibility for consumer tax credits. This is because of stipulations that prevent crediting vehicles made with components that come from “foreign entities of concern,” such as companies tied to the governments of China, Iran, North Korea or Russia.

However, consumers will now be able to get their tax credit as an instant rebate in the year when they purchase the vehicle, instead of claiming it the following year on their taxes.

Earned Income Credit

The IRS is increasing the earned income tax credit, with families now eligible to receive $7,830 if they have 3 or more qualifying children, an increase of from $7,430 for tax year 2023. You should consult a tax advisor for information related to maximum EITC amounts, income thresholds and phase-outs.

Standard Mileage Rate

The Internal Revenue Service is increasing the “optional standard mileage rate” used to calculate business tax deductions by 1.5 cents a mile for 2024, bringing the IRS rate to 67 cents per mile driven for business use in 2024. The mileage rate for medical miles driven is 21 cents per mile and the rate for charitable miles driven is 14 cents per mile for 2024.

Alternative Minimum Tax

The Alternative Minimum Tax exemption amount for tax year 2024 is $85,700 and begins to phase out at $609,350 ($133,300 for married couples filing jointly for whom the exemption begins to phase out at $1,218,700).

For comparison, the 2023 exemption amount was $81,300 and began to phase out at $578,150 ($126,500 for married couples filing jointly for whom the exemption began to phase out at $1,156,300).

Gift Exclusion

The annual exclusion for gifts is $18,000 for calendar year 2024, increased from $17,000 for calendar year 2023.


If you have questions about this featured topic or other accounting and tax related topics, please do not hesitate to contact us at 727-327-1999 OR [email protected].
ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.

Individuals who purchased new electric vehicles may be eligible for a federal tax credit of up to $7,500 for tax year 2023. The credit is available to individuals and businesses. It is nonrefundable and there are numerous requirements and conditions that affect eligibility and the amount of the credit.

Eligibility

To qualify, the vehicle must have a battery capacity of at least 7 kilowatt hours, a gross vehicle weight rating of less than 14,000 pounds, and be made by a qualified manufacturer. Vehicles must also undergo final assembly in North America, which further limits the vehicles that qualify.

There are new requirements effective from April 18, 2023, which include meeting critical mineral and battery component requirements to qualify for the credit.

The vehicle’s manufacturer suggested retail price for new vehicles (MSRP) must not exceed $80,000 for vans, SUVs, and pickup trucks, and $55,000 for other vehicles.

Amount of Credit

The amount of the tax credit depends on various factors, including the vehicle’s MSRP, manufacturer, final assembly location, battery component, critical mineral sourcing, and the taxpayer’s modified adjusted gross income (MAGI). The amount of the credit also depends on when you placed the vehicle in service, regardless of purchase date.
For vehicles placed in service January 1 to April 17, 2023:
• $2,500 base amount
• Plus $417 for a vehicle with at least 7 kilowatt hours of battery capacity
• Plus $417 for each kilowatt hour of battery capacity beyond 5 kilowatt hours
• Up to $7,500 total
In general, the minimum credit will be $3,751 ($2,500 + 3 times $417), the credit amount for a vehicle with the minimum 7-kilowatt hours of battery capacity.
For vehicles placed in service April 18, 2023 and after:
Vehicles will have to meet all of the same criteria listed above, plus meet new critical mineral and battery component requirements for a credit up to:
• $3,750 if the vehicle meets the critical minerals requirement only
• $3,750 if the vehicle meets the battery components requirement only
• $7,500 if the vehicle meets both
A vehicle that doesn’t meet either requirement will not be eligible for a credit. Additionally, the taxpayer’s modified adjusted gross income (MAGI) cannot exceed certain limits. The MAGI limit for married couples filing jointly is $300,000, $225,000 for heads of households, and $150,000 for all other filers.

Used Vehicles

Used electric vehicles purchased in 2023 or after may also qualify for a tax credit of up to $4,000.

How to Claim

To claim the tax credit, individuals must file Form 8936, Qualified Plug-in Electric Drive Motor Vehicle Credit, with their tax return and provide the vehicle’s VIN. Sellers must also provide certain information to the taxpayer at the time of sale and report the same information to the IRS.

All of the factors discussed above interact with each other, and the actual tax credit amount can vary based on the specific circumstances of the vehicle purchase and the taxpayer’s income. Consulting with a tax professional or referring to official IRS publications can provide more precise information regarding the tax credit for electric vehicles purchased in 2023.

Update for Tax Year 2024

For tax year 2024, the IRS plans to expand access to the tax benefit by allowing consumers to choose between claiming a nonrefundable credit on their tax returns to lower their tax bill (as described above) or transferring the credit to the dealer to lower the price of the car at the point of sale.


If you have questions about this featured topic or other accounting and tax related topics, please do not hesitate to contact us at 727-327-1999 OR [email protected].
ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.

Traditional Individual Retirement Accounts (IRAs) are “tax-deferred plans,” meaning you don’t pay taxes on your account contributions or earnings until you take withdrawals. Because the IRS wants to start collecting those taxes sooner rather than later, they require you to start taking annual withdrawals when you reach a certain age. Beginning in 2023, the SECURE 2.0 Act raised the age that you must begin taking required minimum distributions (RMD’s) to age 73. The RMD is the smallest amount you must withdraw from your tax-deferred IRA retirement accounts every year after age 73, whether you need the money or not.

RMDs and Life Expectancy

RMDs are based on the IRS life expectancy tables. There are varying tables for different circumstances. For example, The IRS uniform lifetime table utilizes a life expectancy divisor of 26.5 if you are age 73. To figure the RMD for that year, a person would divide their IRA account balance by 26.5. For example, if the IRA account balance was $100,000, the owner would have to withdraw $3,733.58 ($100,000 divided by 26.5) and pay taxes on this withdrawal in that year.

Each year, your life expectancy divisor is one year less, so the RMD goes up a little bit every year, until it eventually levels off and gradually decreases.

Calculations utilize separate tables for certain circumstances. For example, if your spouse is at least 10 years younger and your sole beneficiary, the IRS requires the use of a separate table for the RMD calculation. In addition, different rules apply if you are the beneficiary of an inherited IRA.

Retirement Accounts Subject to RMDs

In addition to traditional IRAs, these other types of retirement accounts are also subject to RMDs:
• Simplified Employee Pension (SEP) IRAs
• Savings Incentive Match Plan for Employees (SIMPLE) IRAs
• 401(k)s
• Nonprofit 403(b) plans
• Government 457 plans
• Profit-sharing plans

For IRA accounts, you may be able to take your RMD out of one account, or take some from each account, as long as you withdraw the required minimum. Defined contribution plans require you to calculate and satisfy your RMD separately for each plan and withdraw the amount from that plan.

Because Roth IRAs are funded with contributions already taxed, these don’t require RMDs until after the owner dies. Also, if you’re still working after age 73 and have a traditional 401(k) or other workplace contribution plan, you may be able to defer RMDs until April 1 of the year after you stop working.

Schedule for Taking RMDs

For tax year 2023, you must start taking RMDs by April 1 of the year after you turn 73. Let’s say you celebrate your 73rd birthday on July 4, 2023. You must take the RMD by April 1, 2024. You’ll have to take another RMD by Dec. 31, 2024 and by Dec. 31 each year after that.

Note that if you wait until 2024 (up to April) to take your AMD, you will actually be taking two RMDs in 2024: your RMD for tax year 2023 AND your RMD for tax year 2024. Taking two RMDs in one tax year could push you into a higher tax bracket, so it might be wiser to take your first RMD by December 31.

Penalties

The penalty for not taking an RMD is severe, a 50 percent excise tax on the amount you should have taken out. Although the IRS will sometimes forgive the penalty, it’s best not to incur it in the first place.


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