Federal Direct Income Tax & Business Services

08/23/2024

12/28/2023

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12/28/2023

Home energy tax credits

https://www.irs.gov/credits-deductions/home-energy-tax-credits

If you make energy improvements to your home, tax credits are available for a portion of qualifying expenses. The credit amounts and types of qualifying expenses were expanded by the Inflation Reduction Act of 2022.

We'll help you compare the credits and decide whether they apply to expenses you've already paid or will apply to improvements you're planning for the future.

Who can claim the credits
You can claim either the Energy Efficient Home Improvement Credit or the Residential Energy Clean Property Credit for the year when you make qualifying improvements.

Homeowners who improve their primary residence will find the most opportunities to claim a credit for qualifying expenses. Renters may also be able to claim credits, as well as owners of second homes used as residences.

The credits are never available for improvements made to homes that you don't use as a residence.

Energy Efficient Home Improvement Credit
These expenses may qualify if they meet requirements detailed on energy.gov:

Exterior doors, windows, skylights and insulation materials
Central air conditioners, water heaters, furnaces, boilers and heat pumps
Biomass stoves and boilers
Home energy audits
The amount of the credit you can take is a percentage of the total improvement expenses in the year of installation:

2022: 30%, up to a lifetime maximum of $500
2023 through 2032: 30%, up to a maximum of $1,200 (heat pumps, biomass stoves and boilers have a separate annual credit limit of $2,000), no lifetime limit
Get details on the Energy Efficient Home Improvement Credit.

Residential Clean Energy Credit
These expenses may qualify if they meet requirements detailed on energy.gov:

Solar, wind and geothermal power generation
Solar water heaters
Fuel cells
Battery storage (beginning in 2023)
The amount of the credit you can take is a percentage of the total improvement expenses in the year of installation:

2022 to 2032: 30%, no annual maximum or lifetime limit
2033: 26%, no annual maximum or lifetime limit
2034: 22%, no annual maximum or lifetime limit

Energy improvements to your home such as solar or wind generation, biomass stoves, fuel cells, and new windows may qualify you for credits expanded in 2022.

12/28/2023

Credits for new clean vehicles purchased in 2023 or after

https://www.irs.gov/credits-deductions/credits-for-new-clean-vehicles-purchased-in-2023-or-after

If you place in service a new plug-in electric vehicle (EV) or fuel cell vehicle (FCV) in 2023 or after, you may qualify for a clean vehicle tax credit.

At the time of sale, a seller must give you information about your vehicle's qualifications. Sellers must also register online and report the same information to the IRS. If they don't, your vehicle won't be eligible for the credit.

Find information on credits for used clean vehicles, qualified commercial clean vehicles, and new plug-in EVs purchased before 2023.

Who qualifies
You may qualify for a credit up to $7,500 under Internal Revenue Code Section 30D if you buy a new, qualified plug-in EV or fuel cell electric vehicle (FCV). The Inflation Reduction Act of 2022 changed the rules for this credit for vehicles purchased from 2023 to 2032.

The credit is available to individuals and their businesses.

To qualify, you must:

Buy it for your own use, not for resale
Use it primarily in the U.S.
In addition, your modified adjusted gross income (AGI) may not exceed:

$300,000 for married couples filing jointly
$225,000 for heads of households
$150,000 for all other filers
You can use your modified AGI from the year you take delivery of the vehicle or the year before, whichever is less. If your modified AGI is below the threshold in 1 of the two years, you can claim the credit.

The credit is nonrefundable, so you can't get back more on the credit than you owe in taxes. You can't apply any excess credit to future tax years.

Credit amount
The amount of the credit depends on when you placed the vehicle in service (took delivery), 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.

Qualified vehicles
To qualify, a vehicle must:

Have a battery capacity of at least 7 kilowatt hours
Have a gross vehicle weight rating of less than 14,000 pounds
Be made by a qualified manufacturer.
FCVs do not need to be made by a qualified manufacturer to be eligible. See Rev. Proc. 2022-42 for more detailed guidance.
Undergo final assembly in North America
Meet critical mineral and battery component requirements (as of April 18, 2023).
The sale qualifies only if:

You buy the vehicle new
The seller reports required information to you at the time of sale and to the IRS.
Sellers are required to report your name and taxpayer identification number to the IRS for you to be eligible to claim the credit.
In addition, the vehicle's manufacturer suggested retail price (MSRP) can't exceed:

$80,000 for vans, sport utility vehicles and pickup trucks
$55,000 for other vehicles
MSRP is the retail price of the automobile suggested by the manufacturer, including manufacturer installed options, accessories and trim but excluding destination fees. It isn't necessarily the price you pay.

You can find your vehicle's weight, battery capacity, final assembly location (listed as “final assembly point”) and VIN on the vehicle's window sticker.

Click the button below to see if a vehicle is eligible for the new clean vehicle credit.

You may qualify for a clean vehicle tax credit up to $7,500 if you buy a new, qualified plug-in electric vehicle or fuel cell electric vehicle.

02/14/2023

IR-2023-23, Feb. 10, 2023 — The IRS provided details today clarifying the federal tax status involving special payments made by 21 states in 2022.

02/09/2023

IRS introduces new service industry tip reporting program

IR-2023-19, Feb. 6, 2023

WASHINGTON — The Treasury Department and Internal Revenue Service today issued Notice 2023-13, which contains a proposed revenue procedure that would establish the Service Industry Tip Compliance Agreement (SITCA) program, a voluntary tip reporting program between the IRS and employers in various service industries. The IRS is issuing this guidance in proposed form to provide an opportunity for public comment.

The proposed SITCA program is designed to take advantage of advancements in point-of-sale, time and attendance systems, and electronic payment settlement methods to improve tip reporting compliance. The proposed program would also decrease taxpayer and IRS administrative burdens and provide more transparency and certainty to taxpayers. The proposed program includes several features:

The monitoring of employer compliance based on actual annual tip revenue and charge tip data from an employer's point-of-sale system, and allowance for adjustments in tipping practices from year to year.
Participating employers demonstrate compliance with the program requirements by submitting an annual report after the close of the calendar year, which reduces the need for compliance reviews by the IRS.
Participating employers receive protection from liability under the rules that define tips as part of an employee's pay for calendar years in which they remain compliant with program requirements.
Participating employers have flexibility to implement employee tip reporting policies that are best suited for their employees and their business model in accordance with the section of the tax law that requires employees to report tips to their employers.
The intent of the SITCA program is to serve as the sole tip reporting compliance program for employers in various service industries and would replace the following programs:

Tip Rate Determination Agreement (TRDA)
Tip Reporting Alternative Commitment (TRAC)
Employer designed TRAC (EmTRAC)
The IRS is continuing to explore opportunities within the gaming industry and, as such, this program does not impact the existing Gaming Industry Tip Compliance Agreement (GITCA) program.

The proposed revenue procedure provides that for employers with any of these existing agreements, such agreements would remain in effect until the earlier of:

The employer's acceptance into the SITCA program;
An IRS determination that the employer is noncompliant with the terms of their TRDA, TRAC or EmTRAC agreement; or
The end of the first full calendar year after the final revenue procedure is published in the Internal Revenue Bulletin.

02/07/2023

Here are some quick key things for these taxpayers to know about claiming dependents on their tax return:
https://www.irs.gov/newsroom/things-taxpayers-should-know-about-claiming-dependents
Claiming dependents.
A dependent is either a child or a qualifying relative who meets a set of tests. Taxpayers should remember to list the name and Social Security number for each dependent on their tax return.

Dependents cannot claim dependents.
Taxpayers can’t claim any dependents if someone can claim the taxpayer – or their spouse, if filing jointly – as a dependent.

Dependents may have to file a tax return.
This depends on certain factors like total income, whether they’re married and if they owe certain taxes.

Child Tax Credit.
Taxpayers may be able to claim this credit for each qualifying child under age 17 at the end of the year, if the taxpayer claimed that child as a dependent.

Credit for Other Dependents.
Taxpayers may be able to claim this credit for qualifying relatives and children who don’t qualify for the Child Tax Credit.

Taxpayers can get answers to questions about claiming dependents, such as "Whom May I Claim as a Dependent?," by using the Interactive Tax Assistant tool.

https://www.irs.gov/newsroom/things-taxpayers-should-know-about-claiming-dependents

Tax Reform Tax Tip 2019-35, April 3, 2019

02/07/2023

Question
How do you distinguish between a business and a hobby?
Answer
In making the distinction between a hobby or business activity, take into account all facts and circumstances with respect to the activity. A hobby activity is an activity not done for profit. This includes activities done mainly for sport, recreation, or pleasure. No one factor alone is decisive. You must generally consider these factors in determining whether an activity is a business engaged in making a profit:

Whether you carry on the activity in a businesslike manner and maintain complete and accurate books and records.
Whether you have personal motives in carrying on the activity.
Whether the time and effort you put into the activity indicate you intend to make it profitable.
Whether you depend on income from the activity for your livelihood.
Whether your losses are due to circumstances beyond your control (or are normal in the startup phase of your type of business).
Whether you or your advisors have the knowledge needed to carry on the activity as a successful business.
Whether you were successful in making a profit in similar activities in the past.
Whether the activity makes a profit in some years and how much profit it makes.
Whether you can expect to make a future profit from the appreciation of the assets used in the activity.
You may find more information on this topic in section 1.183-2(b) of the Federal Tax Regulations.