Ed. Note: Local tax consultant Bill Conlan has worked for almost five decades filing taxes and addressing concerns. Once again this year, he has cobbled together those tax issues that may affect many local filers.
By Bill Conlan
Tax Consultant
I hope that last year was a good year for everyone, and now that the holidays are over, it is once again time to start thinking about filing your taxes for 2023.
A few changes being made that are not included on the list below have to do with the new 1099-K reporting requirement mentioned last year that was supposed to pertain to 2023 taxes, however that has now been extended to now begin with the 2024 tax year. You may still be receiving 1099-K information that pertains to any additional income you receive, however the reporting amount is staying at the $20,000 amount, or 200 transactions.
Many additional credits for child and dependent care expenses and the enhanced child tax credits that pertained to 2022 taxes, have now expired and are not available for 2023 taxes. Be aware that those credits most likely lowered your tax liability last year, and will not do so this year. There also is no advanced child tax credits available for 2023 taxes as there were for last year.
The Standard Deduction amounts for all filing statuses have increased by a cost-of-living percentage for the tax year.
The maximum contribution amounts for all categories of IRS’s, including 401K’s, 403B’s, 457’s and Roth’s has also increased.
The CT Department of Revenue Services has made a few minor changes which are as follows:
The Earned Income Tax Credit has increased from 30.5% of the Federal credit to 40%. Legislation lowers the two lowest rates from 3% of the first $10,000 to 2%, and lowers the first 5% rate to 4.5% on the first $40,000 for single taxpayers, and $80,000 for married individuals. For Pension and Annuity Income the rate gradually phases out at $100,00 for single and $150,000 for joint filers. This phases-in over 4 years, 25% for 2023, 50%for 2024, 75% for 2025, and 100% for years after 2026 and future years. Most of these changes begin after January 1, 2024.
ENERGY CREDITS- The lifetime $500 limit is now replaced by a $1,200 annual credit limit, credits are $150 for home energy audits, and $250 for exterior doors and $500 total for all exterior doors. Also, $600 for exterior windows and skylights, central air conditioners, electric panels, natural gas, propane, or oil water heaters, gas or oil furnaces or hot water boilers and $2,000 for electric or gas water heaters, and biomass stoves and boilers
RESIDENTIAL CLEAN ENERGY CREDIT-A 30% credit is allowed for costs to install qualifying systems that use solar, wind or geothermal fuel cell power to produce electricity, heat water or regulate home heat. Qualifying residences must be in the U.S., but can include vacation homes
VEHICLE CREDITS-A clean vehicle credit of up to $7,500 for Qualified Plug-In Electric Drive Vehicles. The credit is not allowed if MAGI limits exceed $300,000 for MFJ, or $150,000 for all others, or if the MSRP exceeds $80,000 for a van or pick-up truck, or $55,000 for any other vehicle. Beginning in 2024 the credits can be transferred to the dealers for payment on the vehicle to lower the price of the vehicle. The dealer must be a qualified dealer in order for this credit to be transferred to them. There is also a Previously-Owned Clean Vehicle Credit available after 2022 that is equal to 30% of the vehicles purchase price, up to a maximum credit of $4,000.
CHANGES TO REQUIRED MINIMUN DISTRIBUTIONS (RMD’S)-Many changes in the laws were made to RMD rules, and I will touch on a few that you should be aware of in the coming tax years. Secure 2.0 increased the age to start taking RMD’s from age 72 to age 73, but only for taxpayers reaching age 72 after 2022. RMD’s can be aggregated from all IRA’s and taken from just one IRA, but different types of IRA’s cannot be aggregated together.
SECURE 2.0- The act is designated to encourage more employers to offer retirement plan benefits to employees to start saving for their future. The act also provides various exceptions to the additional 10% tax for taking distributions prior to age 59 ½. One such exception allows for the distribution to be repaid over a 3 year period similar to distributions taken during COVID. Prior to SECURE 2.0, a penalty exception was allowed for public safety employees who attained age 50, but now the act also allows for employees who are firefighters, corrections officers and forensic security employees. After 12/23, exceptions are also provided for victims of domestic abuse and the amount eligible is limited to $10,000, and the act also includes emergency exceptions for distributions of up to $1,000 taken during the year. 529 plans can now be rolled over into a Roth IRA, and be excluded from income if certain conditions are met, however, the amount cannot exceed $35,000 over the taxpayer’s lifetime and the amount rolled over cannot exceed the annual contribution limits.
Corporate Transparency Act (CTA)-The government is now requiring that information concerning business entities must report to this agency any information on U.S. corporations and LLC’s doing business in the United States. The act will collect data on who owns any interest in these entities. There are currently 35-40 million such entities registered to do business in the U.S., and in most cases this reporting will include any business registered under an LLC designation. The reporting is to begin starting Jan 2024 and be reported to the Financial Crimes Enforcement Network (FINCEN). Entities registered with the state after 12/23 have 30 days to file with FinCen, and those already in existence, have until 12/25 to file.
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