On 8/16/22, the 2022 Inflation Reduction Act (IRA) was enacted. The Act includes numerous provisions, mostly relating to tax credits for energy efficient expenses and offset mostly by increased taxes on large corporations. The following is a summary of selected provisions that may affect you:
- Potential $7,500 tax credit for buyers of certain electric cars. Phase out with income above $150,000 single/$300,000 married.
- Potential $4,000 tax credit for buyers of used electric cars more than 2 years old, 1st resale, and purchased from a dealer. Phase out with income above $75,000 single/$150,000 married.
- Extension of the 30% tax credit for solar/wind/geothermal energy residential improvements.
- 30% tax credit for energy efficient home improvements (max annual credit of $1,200). This is for energy efficient improvements, such as windows, doors, insulation, furnace, etc.
- Increase in funding to the IRS of around $80 Billion over 10 years. That money is to be used to increase enforcement (audits), increase taxpayer services, and update the Service’s software.
As long as we are mentioning audits, we frequently get asked what our involvement is in an audit. The answer is…..it depends. We can be as involved as you would like us to be. Typically, we have you sign a Power of Attorney form (specific to this audit) so that we can do all of the dealing with the IRS Agent at our office (or over the mail). Your job would be to appear at the initial interview with us and to gather the information that we need to present to the auditor. Of course, we charge our standard hourly billing rates for our time.
Student Loan Forgiveness
Borrowers who hold loans with the Department of Education (Federal loans only) and make less than $125,000 a year are eligible for up to $10,000 in student loan forgiveness. Individuals who received pell grants can increase that number to $20,000. This forgiveness is tax free for Federal and North Dakota income taxes (it will be taxable in certain states).
The Dept. of Education will announce details on how borrowers can claim this relief in the coming weeks.
IRS Penalty Relief
The IRS is forgiving (and refunding if already paid) 2019 and 2020 Tax Year Failure to file penalties for Forms 1040, 1041, 1065, 1120 and 1120-S incurred through September 30, 2022.
Please contact us if you have any questions about these changes or any other items that may affect you tax situation.
Brian Chandler, CPA