Solar Tax Credit Gets New Life

The Inflation Reduction Act signed into law by President Biden on August 16, 2022, gives new life to the federal tax credit for the purchase and installation costs of residential solar-power systems and provides guidelines allowing batteries to also qualify for the credit.

The solar credit is a percentage of the cost of a solar electric system installed on a taxpayer’s first or second residence located in the U.S. Before the passage of the Inflation Reduction Act the solar credit was being phased out by slowly reducing the credit percentage from 30% to 22% over several years, and the credit was scheduled to end after 2023. The Inflation Reduction Act extends the credit through 2032 at 30% before phasing it out in the years 2033 and 2034.

Those who qualify for the credit in 2022 will receive a bonus, as the credit for 2022 was 26% under the prior law phase-out, but the legislation has returned the credit to 30% for 2022. The following table summarizes the credit for the past and the future years under this new legislation.


Applicable Year

Credit Percentage
Thru 2019 30%
2020-2021 26%
2022-2032 30%
2033 26%
2034 22%
After 2034 0%


Batteries – Emergency power outages imposed by utilities in fire-prone areas during periods of high winds and low humidity, as well as in other disaster areas, can be a major inconvenience, especially for those that work from home, resulting in many taxpayers asking if storage batteries added to a solar installation would qualify for the credit.

Before this law change, the tax code was silent on whether storage batteries were eligible for the credit, although the IRS had issued a private ruling indicating that they would be allowed. The Inflation Reduction Act of 2022 amended the code by adding and defining the term “qualified battery storage technology expenditure.” Thus clarifying that for expenditures made after December 31, 2022, battery storage technology that meets the following requirements will qualify for the credit:

(A) It is installed in connection with a dwelling unit in the United States that is used as a residence by the taxpayer, and

(B) It has a capacity of not less than 3-kilowatt hours.

Homeowners who already have a solar installation can add a storage battery and qualify for the solar credit for the cost of the battery.

Is a Solar System Appropriate For Your Circumstances? – Those TV adds tout how little your electric bill will be after you have a solar system installed. But they fail to consider the cost of the system itself and subsequent system maintenance. When you are deciding whether to acquire a home solar system, you need to factor in the cost of the system (and the interest you will be paying if you are financing it) as compared to conventional electricity costs. How many years will it take to recover your cost? Do you plan to live in your home beyond that time? Is a solar system worth the cost? Electricity costs can vary significantly according to locale.

Even if not financially beneficial, there are situations in which the cost may not be the deciding factor. Some areas experience frequent power outages; you may simply want to go green or go off the grid where electric service is not reliable.

If you plan to go ahead with a solar installation, here are some of the issues you need to be aware of.

  • Non-Refundable Credit – The credit is nonrefundable, meaning it can only reduce your tax liability to zero. However, the portion of the credit that is not allowed because of this limitation may be carried to the next tax year and added to the credit allowable for that year.
  • Maximum Credit – There is no specific maximum, however, and since it is not a refundable credit, the benefit may be spread over several years, and if not utilized by the time the credit is phased out, you may not get the benefit of the entire credit.
  • Example: Suppose in 2022, your solar installation costs $25,000 and the installation was completed in 2022. That would qualify you for a solar tax credit of $7,500 ($25,000 x 30%). But suppose the income tax liability on your 2022 tax return is only $3,000. Then, the credit would reduce your tax liability to zero, and the other $4,500 ($7,500–$3,000) of the credit is carried over to your 2023 tax return, where the credit will be limited to that year’s tax amount. If your tax is again less than the amount of the credit, the excess credit carries to the following year, and so on, until the credit is used up or the credit expires. So if you are expecting the credit to offset your outlay for the cost in the first year you may be in for a surprise.
  • Qualifying Property – Both a taxpayer’s main and secondary residence qualify for this credit.
  • Who Gets the Credit? – It may come as a surprise, but you need not own the residence where the solar property is installed to qualify for the credit; you need only be a “resident” of the home. The tax code does not specify that an individual must own the home, only that it is their residence.
  • Example: A son lives with his mother, who owns the home. The son pays to have the solar system installed; the son is the one who qualifies for the credit. 
  • When is the Credit Available? – The credit may be claimed on the tax return of the year during which the installation is completed.
  • Example: If you purchase and pay for a system installation that is completed in 2022, the credit will be claimed on your 2022 return. However, if you pay for the installation in 2022 and the installation is not completed until 2023, then the credit is claimed on your 2023 return.
  • Multiple Installations – The credit is available for multiple installations. For instance, after the initial installation, if you add additional solar panels to increase capacity, these would be treated as original installations and qualify for credit at the credit rate applicable for the year the additional installation was completed. On the other hand, if you had to replace damaged panels or perform other maintenance on the system, these costs would not be for an original system and would not qualify for the credit.
  • Installation Costs – Amounts paid for labor costs allocable to onsite preparation, assembly, or original installation of property eligible for the credit—or piping or wiring connecting the property to the residence—are expenditures that qualify for the credit. This includes expenditures relating to a solar system installed on a roof or ground-mounted installations.
  • Basis Adjustment – For a home, the term “basis“ generally refers to the cost of the home plus improvements and is the amount subtracted from the sales price to determine the gain or loss when the home is sold. The cost of a solar system adds to a home’s basis, but because the solar credit is a tax benefit, the credit reduces the basis. This will generally create a different basis for federal and state purposes where a state does not provide a solar credit, or it differs from the federal solar credit amount.
  • Association or Cooperative Costs – If you are a member of a condominium association for a condominium you own or are a tenant-stockholder in a cooperative housing corporation, you are treated as having paid your proportionate share of any qualifying solar system costs incurred by the condo, cooperative association, or corporation.
  • Mixed-Use Property – In cases in which you use a portion of your residence for deductible business or rent part of your home to others, the expenses must be prorated, and only your portion of the qualified solar costs can be used to compute the credit. There is an exception if 20% or less of the property is used for business purposes, in which case the full amount of the expenditure is eligible for the credit.
  • Newly Constructed Homes – If you are planning on purchasing a newly constructed home that includes a solar system, you may be entitled to claim the solar credit. However, to do so, the costs of the solar system must be stated separately from the home construction costs and the appropriate certification documents must be available.
  • Utility Subsidy – Some public utilities provide a nontaxable subsidy (rebate) for the purchase or installation of energy-conservation property. In that case, the cost of the solar system eligible for the credit must be reduced by the amount of the nontaxable subsidy that was received, so only your net cost is eligible for the credit.
  • Leased Installations – When a solar installation is leased, the lessor gets the credit, not the home resident.

As you can see, there is a lot to consider before making the final decision to install a solar system. Is it worth it, and is it the right financial move for you? Please call for a consultation before signing any contract to make sure a solar system is appropriate for you tax-wise.

Will You Benefit from Biden’s Student Loan Relief?

On August 24, President Biden announced a three-part plan to deal with student loan debt which includes, among other things, $20,000 in loan relief to borrowers with loans held by the Department of Education whose individual income is less than $125,000 ($250,000 for married couples) and who received a Pell Grant. Borrowers who meet those income standards but did not receive a Pell Grant in college can receive up to $10,000 in loan relief. Current students with loans are eligible for this debt relief.



Pell Grant Recipients Others
Amount To Be Forgiven Up to $20,000 Up to $10,000
Income Limit Married Filing Jointly $250,000
Others $125,000
Note: This is not a phaseout, $1 over the income limit ends the qualification.

Dependents of Another – Borrowers who are dependent students will be eligible for relief based on parental income, rather than their own income.

Who Will Benefit? – Since the forgiveness is targeted at lower-income families, per a White House Fact Sheet, nearly every Pell Grant recipient comes from a family that made less than $60,000 a year. Based on that at least 93% of Pell Grant recipients have income less than $60,000 and would qualify for the $20,000 forgiveness.



Family Income Percent
$30,000 or Less 66%
$30,001 through $59,999 28%
$60,000 or more 7%
The White House used rounded numbers thus the total is not 100%

The Department of Education estimates that, among borrowers who are no longer in college, nearly 90% of relief dollars will go to those earning less than $75,000 a year.

Repayment Pause – Repayments were previously paused as part of the COVID relief. That pause has been extended one last time until December 31, 2022. Borrowers should plan to resume payments in January 2023.

Monthly Payments Cuts – The program would also cut monthly payments in half for undergraduate loans. The Department of Education is proposing a new income-driven repayment plan that protects more low-income borrowers from making any payments and caps monthly payments for undergraduate loans at 5% of a borrower’s discretionary income—half of the rate that borrowers must pay now under most existing plans. This means that the average annual student loan payment will be lowered by more than $1,000 for both current and future borrowers.

It is estimated that nearly 8 million borrowers will be eligible to receive automatic relief because income data is already available to the U.S. Department of Education. If not, a borrower will be able to provide that information when the department makes a simple application available in the coming weeks. Watch for additional details.

Normally, per the tax code, when debt is forgiven the amount relived is treated as taxable income. That issue is not addressed in the Fact Sheet from the White House.

If you have questions, please give our office a call.

Mid-Year Tax Planning Checklist

All too often, taxpayers wait until after the close of the tax year to worry about their taxes and miss opportunities that could reduce their tax liability or financially benefit them. Mid-year is the perfect time for tax planning. The following are some events that can affect your tax return; you may need to take steps to mitigate their impact and avoid unpleasant surprises after it is too late to address them. Here are some events that can trigger tax consequences. Did you (or are you going to):

  • Get Married, Divorced, or Become Widowed?
  • Change Jobs or Has Your Spouse Started Working?
  • Have a Substantial Increase or Decrease in Income?
  • Have a Substantial Gain from the Sale of Stocks or Bonds?
  • Buy or Sell a Rental?
  • Start, Acquire, or Sell a Business?
  • Buy or Sell a Home?
  • Retire This Year?
  • Reach Age 72 This Year?
  • Refinance Your Home or Take Out a Second Home Mortgage This Year?
  • Receive a Substantial Inheritance This Year?
  • Take Advantage of Tax-Beneficial Retirement Savings?
  • Make Any Significant Equipment Purchases for Your Business?
  • Purchase a New Business Vehicle and Trade-in or Dispose of the Old One?
  • Adequately Document Your Cash and Non-Cash Charitable Contributions?
  • Keep Up With Your Estimated Tax Payments?
  • Make Any Unplanned Withdrawals from an IRA or Pension Plan?
  • Add a Solar Electric System to Your Home or Purchase an Electric Vehicle?
  • Hire Veterans or Other Individuals in Your Business Who May Qualify for the Work Opportunity Tax Credit?
  • Trade or Sell Cryptocurrency?
  • Incur Expenses Adopting a Child?
  • Start Receiving Social Security Benefits?
  • Exercise an Employee Stock Option?
  • Start Using a Part of Your Home for Business This Year?
  • Exchange Real Properties Used in Your Trade or Business or Held for Investment?
  • Start a Retirement Plan in Your Self-Employment Business?
  • Make Gifts of Over $16,000 to Any One Individual This Year?

Of course, these are not the only issues that have tax consequences.

If you anticipate or have already encountered any of the above events or conditions, it may be appropriate to consult with our office—preferably before the event—and definitely before the end of the year.

Life Changing Events Can Impact Your Taxes

Throughout your life there will be certain significant occasions that will impact not only your day-to-day living but also your taxes. Here are a few of those events:

Getting Married – If you just got married or are considering getting married, you need to be aware that once you are married you no longer file returns using the single status and generally will file a combined return with your new spouse using the married filing jointly (MFJ) status. When you file MFJ all of the income of both spouses is combined on one return, and where both spouses have substantial income, that could mean your combined incomes could put you in a higher tax bracket. However, when filing MFJ you also benefit by being able to claim a standard deduction equal to twice that of the standard deduction for a single taxpayer. It may be appropriate for a couple planning a wedding, or even those who just got married, to estimate differences of filing as unmarried and filing married so there are no unpleasant surprises at tax filing time. It may be appropriate to adjust withholding to compensate for the MFJ status.

Be mindful that filing status is determined on the last day of the tax year, so no matter when you get married during the year you will be considered married for the entire year for tax purposes. Once married here are some tasks that should be done:

  • Notify the Social Security Administration − Report any name change to the Social Security Administration so that your name and SSN will match when you file your next tax return. Informing the SSA of a name change is quite simple and can be done on the SSA’s website. Alternatively, you can call the SSA at 800-772-1213 or visit a local SSA office. Your income tax refund may be delayed if it is discovered that your name and SSN don’t match at the time your return is filed.
  • Notify the IRS – If you have a new address, you should notify the IRS by completing and sending in Form 8822, Change of Address.
  • Notify the U.S. Postal Service – You should also notify the U.S. Postal Service of any address change so that any correspondence from the IRS or state tax agency can be forwarded to your correct address.
  • Notify the Health Insurance Marketplace – If either or both of you are obtaining health insurance through a government health insurance marketplace, your combined incomes and change in family size could reduce the amount of the premium tax credit to which you would otherwise be entitled, requiring payback of some or all of the credit applied in advance to reduce your monthly premiums. More complicated yet, if either or both of you are included on your parents’ marketplace policy, those insurance premiums must be allocated from their return to your return.

Here are a few tax-related items you should be aware of when filing a joint return:

  • New Spouse’s Past Liabilities – If your new spouse owes back taxes, past state income tax liabilities or past-due child support or has unemployment debts to a state, the IRS will apply your future joint refunds to pay those debts. If you are not responsible for your spouse’s debt and do not want your share of any tax refund used to pay your spouse’s past debts, you are entitled to request your portion of the refund back from the IRS by filing an “injured spouse” allocation form. As an alternative, you can file separately using the “married filing separate” filing status; however, that generally results in higher overall tax.
  • Capital Loss Limitations – If an individual has sold stock or other investment property at a loss, when filing as unmarried, each individual can deduct up to $3,000 of capital losses on their tax return for a possible combined total of $6,000, but a married couple is limited to a single $3,000 loss and if they file married separate, then the limit is $1,500 each.
  • Spousal IRA – Contributions to “Spousal IRAs” are available for married taxpayers who file jointly where one spouse has little or no compensation; the deduction is limited to the lesser of 100% of the employed spouse’s compensation or $6,000 (2022) for the spousal IRA. That permits a combined annual IRA contribution limit of a certain amount (up to$12,000 for 2022). The maximum amount is $7,000 if you or your spouse is age 50 or older ($14,000 if you are both 50+). However, the deduction for contributions to both spouses’ IRAs may be further limited if either spouse is covered by an employer’s retirement plan.
  • Deductions – The standard deduction in 2022 for a married couple (both spouses under age 65) is $25,900 and for a single individual is $12,950. So, if both of you have been taking the standard deduction, there is no loss in deductions. However, if in past years one of you had enough deductions to itemize and the other took the standard deduction, and after your marriage you’ll be filing jointly, you would either have to take the joint standard deduction or itemize, which likely will result in a loss of some amount of deductions.
  • Impact on Parents’ Returns – If your parents have been claiming either of you as a dependent, they will generally lose that benefit. In addition, if you are in college and qualify for one of the education credits, those credits are only deductible on the return where your personal exemption is used. That generally means your parents will not be able to claim the education credits even if they paid the tuition. On the flip side, unless your income is too high, you will be able to claim the credit even though your parents paid the tuition.

Buying a Home – Buying a home, especially your first home, can be a trying experience. Without a landlord to take care of repairs and upkeep of the property those tasks will become your responsibility as a home owner. When you rent, you are responsible for making a rental payment which is not tax deductible. On the other hand, when you own a home, in addition to being responsible for its maintenance, you have to make homeowner’s insurance, mortgage, and real property tax payments. While routine upkeep costs aren’t tax deductible, the interest on the mortgage and the property taxes you pay may be tax deductible, providing you with a significant saving in income tax. However, if the standard deduction amount for your filing status exceeds the total of all itemized deductions the law allows you to claim, you won’t get a tax benefit from the home mortgage interest and property tax payments. So, when figuring if you can afford a home be sure to take into account whether you’ll benefit from those home-related tax savings.

Also consider the long-term benefits of home ownership. Homes have generally appreciated in value in the past, so you can look forward to your home gaining value, and when you sell it, the gain up to $250,000 ($500,000 for a married couple) can be excluded from income if the property has been owned and used as your primary residence for any 2 of the 5 years just prior to the sale.

Many taxpayers don’t feel the need to keep home improvement records, thinking the potential gain will never exceed the amount of the exclusion for home gains ($250,000 or $500,000 if both filer and spouse qualify) if they meet the 2-out-of-5-year use and ownership tests. Here are some situations when having home improvement records could save taxes:


(1) The home is owned for a long period of time, and the combination of appreciation in value due to inflation and improvements exceeds the exclusion amount.

(2) The home is converted to a rental property, and the cost and improvements of the home are needed to establish the depreciable basis of the property.

(3) The home is converted to a second residence, and the exclusion might not apply to the sale.

(4) You suffer a casualty loss and retain the home after making repairs.

(5) The home is sold before meeting the 2-year use and ownership requirements.

(6) The home only qualifies for a reduced exclusion because the home is sold before meeting the 2-year use and ownership requirements.

(7) One spouse retains the home after a divorce and is only entitled to a $250,000 exclusion instead of the $500,000 exclusion available to married couples.

(8) There are future tax law changes that could affect the exclusion amounts.

Everyone hates to keep records but consider the consequences if you have a gain and a portion of it cannot be excluded. You will be hit with capital gains (CG), and there is a good chance the CG tax rate will be higher than normal simply because the gain pushed you into a higher CG tax bracket.

Having or Adopting Children – Besides the loss of sleep, changing diapers, middle of the night feedings, and constant attention, a new born also brings some tax benefits, including a maximum $2,000 child tax credit which can go a long way in reducing your tax liability. If both spouses work, you will no doubt incur child care expenses which can result in a maximum (can be less) credit of between $600 and $1,050 for one child or twice those amounts for two or more children. The credit amounts are based on a maximum child care expense of $3,000 for one child and $6,000 for two or more multiplied by 20 to 35 percent of the expense based upon a taxpayer’s income. (The amounts noted apply for 2022; there were temporary increases in the credits as part of Covid pandemic relief for 2021. Congress may extend the enhanced credits.)

Of course, the medical expenses are deductible if you itemize your deductions but only to the extent the medical expenses exceed 7.5% of your adjusted gross income. Although rarely encountered, the expense of a surrogate mother is not deductible.

If you adopt a child under age 18 or a person physically or mentally incapable of taking care of himself or herself, you may be eligible for a tax credit for qualified adoption expenses you paid. The credit, which is a maximum of $14,890 for 2022, is not refundable, but if the credit is more than your income tax, you can carry over the excess and have 5 years to use up the credit. If the child is a special needs child, the full credit limit will be allowed for the tax year in which the adoption becomes final, regardless of whether you had qualified adoption expenses. The credit phases out for higher income taxpayers.

It is also time to begin planning for the child’s future education. The tax code offers two tax favored education savings accounts, the Coverdell account allowing a maximum contribution of $2,000 per year and the Qualified State Tuition plan, more commonly referred to as a Sec 529 plan, which allows large sums of money to be put aside for a child’s education. There is no federal tax deduction for contributing to either of these programs, but the earnings from the plans are tax-free if used for qualified education expenses, so the sooner the funds are contributed the greater the benefit from tax-free earnings.

Getting Divorced – If you are recently divorced or are contemplating divorce, you will have to deal with or plan for significant tax issues such as asset division, alimony, and tax-return filing status. If you have children, additional issues include child support; claiming of the children as dependents; the child, child care, and education tax credits; and perhaps even the earned income tax credit. Here are some details:

  • Filing Status – As mentioned earlier your filing status is based on your marital status at the end of the year. If, on December 31, you are in the process of divorcing but are not yet divorced, your options are to file jointly or for each spouse to submit a return as married filing separately. There is an exception to this rule if a couple has been separated for all of the last 6 months of the year, and if one taxpayer has paid more than half the cost of maintaining a household for a qualified child. In that situation that spouse can use the more favorable head of household filing status. If each spouse meets the criteria for that exception, they can both file as heads of household; otherwise, the spouse who doesn’t qualify must use the status of married filing separately. If your divorce has been finalized and if you haven’t remarried, your filing status will be single or, if you meet the requirements, head of household.
  • Child Support – Is support for the taxpayer’s children provided by the non-custodial parent to the custodial parent. It is not deductible by the one making the payments and is not income to the recipient parent.
  • Children’s Dependency – When a court awards physical custody of a child to one parent, the tax law is very specific in awarding that child’s dependency to the parent who has physical custody, regardless of the amount of child support that the other parent provides. However, the custodial parent may release this dependency to the noncustodial parent by completing the appropriate IRS form.
  • Child Tax Credit – A federal credit of $2,000 is allowed for each child under the age of 17. This credit goes to the parent who claims the child as a dependent. Up to $1,400 of the credit is refundable if the credit exceeds the tax liability. However, this credit phases out for high-income parents, beginning at $200,000 for single parents.
  • Alimony – For divorce agreements that are finalized after 2018, alimony is not deductible by the payer and is not taxable income for the recipient. Because the recipient isn’t reporting alimony income, he or she cannot treat it as earned income for the purposes of making an IRA contribution.
  • Tuition Credit – If a child qualifies for either of two higher-education tax credits (the American Opportunity Tax Credit [AOTC] or the Lifetime Learning Credit), the credit goes to whoever claims the child as a dependent even if the other spouse or someone else is paying the tuition and other qualifying expenses.

Death of Spouse – Losing a spouse is difficult emotionally, and unfortunately, can be accompanied by a number of tax issues that may or not apply to the surviving spouse. Here is an overview of some of the more frequent issues:

  • Filing Status – If a spouse passes away during the year, the surviving spouse can still file a joint return for that year if the surviving spouse has not remarried. However, after the year of death the surviving spouse will no longer be able to jointly file with the deceased spouse and will have to use a less favorable filing status.
  • Notification – If the deceased spouse is receiving Social Security benefits the Social Security Administration must be immediately notified. Likewise, payers of pensions and retirement plans of the deceased spouse need to be advised of the spouse’s death.
  • Estate Tax – Where the deceased spouse’s assets and prior reportable gifts exceed the current lifetime inheritance exclusion ($12.06 million for deaths in 2022), an estate tax return may be required. However, the lifetime inheritance exclusion can be changed at the whim of Congress. Even when an estate tax return isn’t required because the value of the deceased spouse’s estate is less than the exclusion amount, it may be appropriate to file the estate tax return anyway, as there could be an impact on the estate tax of the surviving spouse when he or she passes.
  • Inherited Basis – Under normal circumstances the beneficiary of a decedent’s assets will have a tax basis in those assets equal to the fair market value of the assets on the date of death. Thus, generally a qualified appraisal of the assets is required. However, for a surviving spouse this can be more complicated depending upon whether the state of residence is a community property state and how title to the property was held.
  • Changing Titles – The title to all jointly held assets needs be changed into the survivor’s name alone to avoid complications in the future.
  • Trust Income Tax Returns – Many couples have created living trusts that, while they are both alive, don’t require a separate tax return to be filed for the trust and can be revoked. But upon the death of one of the spouses, this trust may split into two trusts, one of which remains revocable and the other becomes irrevocable. A separate income tax return for the latter trust will usually have to be prepared and filed annually.

These are just a few of the issues that must be addressed upon the death of a spouse, and it may be appropriate to seek professional help.

If you have questions about the tax impact of any of your life changing situations, be sure to give our office a call for assistance.

What Does The Inflation Reduction Act Mean To You?

On August 16, 2022, President Biden signed into law the Inflation Reduction Act of 2022 which is a scaled-back version of the prior Biden administration proposals originally included in the Build Back Better Act. The legislation includes a variety of provisions, including substantial green energy incentives, reduction of Affordable Care Act insurance premiums, IRS funding, corporate minimum tax, and more. This article will explore how these provisions will impact individual taxpayers.

Increased Internal Revenue Service (IRS) Funding – The IRS has been underfunded for years resulting in inadequate customer service causing extensive waits to speak with an agent to solve issues with the IRS, and substantially reduced enforcement activities.

Although some of the $79.6 billion supplemental appropriations will go towards improving customer service, the bulk of the appropriation will go towards increased enforcement, according to the Congressional Research Service. However, Treasury Secretary Janet Yellen has indicated the additional funds will not be used to increase audits of people making less than $400,000 above historic levels.

Drug Pricing – The legislation permits Medicare to negotiate lower drug prices (up to 10 drugs in 2026, another 15 in 2027 and 2028, and another 20 annually starting in 2029) and puts a cap on annual out-of-pocket costs at $2,000.

Affordable Care Act Insurance Premiums – The previously enacted American Rescue Plan temporally included enhanced subsidies for people buying their own health coverage on the Affordable Care Act Marketplaces for the years 2021 and 2022. The Inflation Reduction Act has extended those subsidies for three years, through 2025. These enhanced subsidies increase the amount of financial help for low and middle-income individuals, many of whom were previously priced out of health insurance coverage.

Corporate Minimum Tax – As a fundraiser to help pay for the other provisions, the legislation includes a new corporate minimum tax of 15% that would be imposed on corporations with an average book income of over $1 billion. This provision is projected to raise $258 billion over 10 years.

Excise Tax on Corporate Stock Buybacks – Stock Buybacks are when a company purchases its own shares, resulting in fewer outstanding shares. This tends to benefit corporate executives rather than raising worker wages, research and development, and other productivity-boosting investments. The legislation imposes a 1% tax on stock buybacks. This provision is projected to raise $74 billion over 10 years.

Home Solar Energy Credit Extended and Increased – Before the passage of the Inflation Reduction Act, a resident of a home was entitled to a non-refundable tax credit for the use of solar electric panels, solar hot water, fuel cells, small wind energy, geothermal heat pumps, and biomass fuel property they had installed for the residence. However, that credit was in the process of being phased out by slowly reducing the credit percentage from 30% to 22%, and the credit was scheduled to end after 2023. With this law change, the credit retroactively returns to 30% for the years 2022 through 2032 when it again begins to phase out and ends after 2034. This means those who qualify for the credit in 2022 benefit from a 30% credit rather than the expected 26% under prior law.

Credit For Energy Efficient Home Modifications – This provision provides a non-refundable tax credit for certain energy-saving improvements to a taxpayer’s home. The credit previously expired at the end of 2021, but under the Inflation Reduction Act has been extended and modified through 2032.

The previous lifetime credit limit of $500 has been replaced with an annual maximum credit of $1,200, and the credit percentage increased from 10% to 30%. Although not a complete list, the following are credit limits that apply to various energy-efficient improvements:

  • $600 for credits with respect to residential energy property expenditures, windows, and skylights.
  • $250 for any exterior door ($500 total for all exterior doors).
  • $300 for residential qualified energy property expenses
  • Notwithstanding these limitations, a $2,000 annual limit applies with respect to amounts paid or incurred for specified heat pumps, heat pump water heaters, and biomass stoves and boilers.
  • The $1,200 credit amount increased by up to $150 for a home energy audit. A home energy audit is an inspection and written report with respect to a dwelling unit located in the United States and owned or used by the taxpayer as the taxpayer’s principal residence, which identifies the most significant and cost-effective energy efficiency improvements with respect to such dwelling unit.
  • The new law eliminates treatment of roofs as creditable after 2022
  • The new law adds Air sealing insulation as a creditable expense.

Under the new law, the one making the improvements and claiming the credit need only be a resident of the home and not necessarily the owner.

Clean Vehicle Credit – After 2022 and through 2032, this credit replaces the current plug-in electric vehicle credit and makes significant changes.

Transition Rule: A taxpayer who, after December 31, 2021, and before August 16, 2022, purchased, or entered a written binding contract to purchase, a new electric vehicle and placed that vehicle in service on or after the date of enactment, may elect to treat the vehicle as being placed in service before the date of enactment of the Act. This transition rule allows a taxpayer to apply the prior law to the vehicle. This allows a taxpayer to avoid the modified AGI (income), vehicle price, and other restrictions under the new law.

Credit Amount – Is based upon two amounts (certified by the qualified manufacturer):

  • Critical Minerals – This portion of the credit is $3,750 and is based upon the percentage of the value of the applicable critical minerals contained in the battery that were:

(i) Extracted or processed in the United States or in any country with which the United States has a free trade agreement in effect, or
(ii) Recycled in North America

Is equal to or greater than the applicable percentage (see applicable percentage below).

  • Battery Component Requirement – This portion of the credit is $3,750 based upon the percentage of the value of the components contained in the battery that is used in the vehicle that were manufactured or assembled in North America is equal to or greater than the applicable percentage (see applicable percentage below).

Applicable Percentage – The applicable percentages for each year are included in the following table:


Year 2023 2024-2025 2026 2027 2028 Later Years
Percentage 50 60 70 80 90 100

Final Assembly Requirement – The Act also requires that final assembly of the vehicle occurs in North America. “Final assembly” means the process by which a manufacturer produces a new clean vehicle at, or through the use of, a plant, factory, or other place from which the vehicle is delivered to a dealer or importer with all component parts necessary for the mechanical operation of the vehicle included with the vehicle, whether the component parts are permanently installed in or on the vehicle. The final assembly requirement applies to vehicles sold after the date of enactment, August 16, 2022.

Not all Vehicles Will Continue to Qualify – Because of the critical mineral, battery, and final assembly requirements, only some of the currently available vehicles will continue to qualify for the new credit.

Manufacturer Limitation – The 200,000-unit manufacturer limit is eliminated for vehicles sold after December 31, 2022.

Manufacturer’s Suggested Retail Price Limitation – No credit is allowed for a vehicle with a manufacturer’s suggested retail price more than the following:


Vans, sport utility vehicles, and pickups $80,000
Other vehicles $55,000

MAGI limit – No credit is allowed for any tax year if the lesser of the modified adjusted gross income (MAGI) of the taxpayer for the:

  • Current tax year, or
  • The preceding tax year

Exceeds the threshold amount as indicated in the table below.



Filing Status MAGI
Married Filing Joint & SS $300,000
Head of Household $225,000
Others $150,000

MAGI means adjusted gross income increased by any foreign earned income and housing exclusions and excluded income Guam, American Samoa, the Northern Mariana Islands, and Puerto Rico.

New Clean Vehicle Definition

  • Minimum battery capacity: 7 kilowatt-hours, up from 4 kilowatt-hours under prior law.
  • Where the seller of the vehicle furnishes a report to the buyer and the IRS that includes:

    o The name and taxpayer identification number of the buyer;

    o The vehicle identification number (VIN) of the vehicle, unless, by U.S. Department of Transportation rules, the vehicle is not assigned a VIN;

    o The battery capacity of the vehicle;

    o Verification that the original use of the vehicle commences with the taxpayer; and

    o The maximum Clean Vehicle credit allowable to the buyer with respect to the vehicle.

  • The term “new clean vehicle” does not include any vehicle placed in service after December 31, 2023, where any of the components contained in the battery of the vehicle were manufactured or assembled by a foreign entity of concern.
  • The term “new clean vehicle” includes any new qualified fuel cell motor vehicle that also meets the final assembly and report requirements.

Transfer of Credit to The Dealer – A taxpayer on or before the purchase date, can elect to transfer the clean vehicle credit to the dealer who the taxpayer is purchasing the vehicle in return for a reduction in purchase price equal to the credit amount.

Making the election cannot limit the use or value of any other dealer or manufacturer incentive to buy the vehicle, nor can the availability or use of the incentive limit the ability of the taxpayer to make the election.

A buyer who has elected to transfer the credit for a new clean vehicle to the dealer and has received a payment from the dealer in return but whose MAGI exceeds the applicable limit is required to recapture the amount of the payment on their tax return for the year the vehicle was placed in service.

Credit For Previously Owned Clean Vehicles – A qualified buyer who acquires and places in service a previously owned clean vehicle after 2022 and before 2032 is allowed an income tax credit equal to the lesser of:

  • $4,000 or
  • 30% of the vehicle’s sale price.

MAGI limit – No credit is allowed for any tax year if the lesser of the modified adjusted gross income (MAGI) of the taxpayer for the:

  • Current tax year, or
  • The preceding tax year Exceeds the threshold amount as indicated in the table below.
Filing Status MAGI
Married Filing Joint & SS $150,000
Head of Household $112,500
Others $75,000

MAGI has the same meaning as for the clean vehicle credit.

Previously Owned Clean Vehicle – A previously owned clean vehicle is a motor vehicle:

  • Model year of which is at least two years earlier than the calendar year in which the taxpayer acquires it.
  • Original use of which starts with a person other than the taxpayer,
  • Acquired in a qualified sale, and
  • Generally meets the requirements applicable to vehicles eligible for the clean vehicle credit for new vehicles or is a clean fuel-cell vehicle with a gross weight rating of less than 14,000 pounds.

Qualified Sale.  A qualified sale is a sale of a motor vehicle:

  • By a dealer,
  • For a price of $25,000 or less, and
  • Which is the first transfer since the Act’s enactment to a qualified buyer other than the original buyer of the vehicle.

Qualified Buyer. A qualified buyer is an individual who:

  • Purchases the vehicle for use and not for resale,
  • Is not a dependent of another taxpayer*, and
  • Has not been allowed a credit for a previously owned clean vehicle during the three-year period ending on the sale date.

    * Even if they have sufficient income to be required to file. Makes no difference if the parent chooses not to claim the child, since the dependency deduction is still “allowable” to the parent.

Transfer of Credit – Follows rules like Clean Vehicle credit transfer rules for vehicles acquired after 2023. Purchasers of previously owned clean vehicles can elect up to the time of sale to transfer the credit to the selling dealer in exchange for cash, or partial payment or a down payment on the vehicle in an amount equal to the credit otherwise allowable to the buyer.

Credit For Qualified Commercial Clean Vehicles – The Inflation Reduction Act of 2022 adds a general business credit for qualified vehicles acquired and placed in service after December 31, 2022, and before 2033.

Credit Amount – The per vehicle credit is the lesser of:

  • 15% of the vehicle’s basis (30% for vehicles not powered by a gasoline or diesel engine) or
  • The “incremental cost” of the vehicle over the cost of a comparable vehicle powered solely by a gasoline or diesel engine.

Maximum Credit – The maximum credit per vehicle is:

  • $7,500 for vehicles with gross vehicle weight ratings of less than 14,000 pounds, or
  • $40,000 for heavier vehicles.

Qualified Commercial Clean Vehicle 

  • Acquired for use or lease by the taxpayer, and not for resale.
  • Manufactured for use on public streets, roads, and highways, or be “mobile machinery.”
  • Have a battery capacity of not less than 15-kilowatt hours (7-kilowatt hours for vehicles weighing less than 14,000 pounds) and
  • Charged by an external electricity source.
  • Qualified commercial fuel cell vehicles are also eligible for the credit.
  • Must be depreciable property.
  • Made by qualified manufacturers, who have written agreements with and provide periodic reports to the Treasury, can qualify.

Research Credit – The legislation increases the limitation on the ability of small businesses to claim the research credit against payroll taxes from $250,000 to $500,000.

This information related the Inflation Reduction Act is preliminary and, in some cases, will require further IRS guidance and regulations. Watch for additional detail in future articles. If you have questions regarding any of these issues, please give our office a call.

Maximizing Your Airbnb Rental Income

If you list your property on Airbnb, you know it has been a remarkable boon for property owners looking to earn income from their available space. The online marketplace makes it easy for you, offering free listings and the ability to set your own price while also offering Host Damage Protection and shouldering the payment process. But for all of the success that hosts worldwide have realized, there have also been frustrations. Some hosts have been disappointed by their earnings and disgruntled by the tax ramifications of their rental income. There are actions you can take – both big and small – to maximize your Airbnb rental income. Likewise, you can take steps to reduce your tax obligation. Let’s take a look at both.

Your Airbnb Revenue

Though the money you make by listing your property on Airbnb is referred to as passive income, it is the listings whose owners put in the most effort who make the most money. While offering a property in a convenient or desirable location may be enough to bring people in, there are steps you can take that will make your space more attractive and generate more positive reviews. This in turn will keep your property booked and allow you to raise your rates. Try these strategies:

  • Make sure that your space looks its best when you’re taking photos and that you’ve used positive, descriptive language to describe your property.
  • Take the time to understand who is renting your property and cater to their needs. If you’re attracting beachgoers be sure to provide colorful, plush towels and beach chairs. Families with children will appreciate books, toys, and video games, and business travelers will be quick to rent a spot that has a dedicated work area.
  • Compare your rates to those of successful listings in your area to make sure that they are in line.
  • Small amenities make a big difference. Leaving a bag of coffee grounds on the counter, a loaf of bread, and a dozen eggs in the refrigerator are a small touch that goes a long way. Similarly, putting out curated soaps or shampoos costs little, but will result in enthusiastic positive reviews that will attract more guests, and may allow you to increase your price to more than cover the small cost incurred.

Optimize Your Rental Income Taxes

The revenue that you take in from renting your property is a form of self-employment, and anything over $1,000 earned in a year is subject to quarterly estimated income tax. These payments are required unless you qualify for the “14-day rule,” which holds that if you rent your property for less than 14 days per year and you use it yourself for more than 14 days per year, there is no reporting requirement, no matter how much you’ve charged. Estimating the taxes you owe each quarter can be based on the previous year’s income – and if it’s your first year as a host the IRS allows you to use your W-2 income. You’ll also need to pay self-employment taxes, and all tolled it can be a big out-of-pocket hit that makes you wonder whether the venture was worth your while.

The good news is that the taxes you pay on your rental income can be offset by the many deductions you’re entitled to take. These may include:

  • The cost of any improvements or repairs that you make to your property, including furnishings, linens,
  • The cost of providing internet or cable services for your guests, as well as any subscription services like Netflix, Hulu, or Disney
  • The cost of having your property professionally cleaned and maintained
  • The cost of any supplies that you use to clean or maintain the property yourself
  • Depreciation on the property
  • Fees that you pay to Airbnb
  • The mortgage interest paid on the property, as well as property insurance if it is not your primary home

To make sure that you’re getting the most out of your property rental and optimizing your rental income, contact our office today.

Research Credit Potentially Doubled By The Inflation Reduction Act

The Inflation Reduction Act that President Biden signed into law back in August, has a lesser-known provision that could benefit many small business startups, allowing them to potentially double the amount of the research and development tax credit they can claim from $250,000 to $500,000 per year against payroll taxes.

This little-known tax benefit for new, qualified small businesses is the ability to apply a portion of their research credit – up to $500,000 after December 31, 2022, to pay the employer’s share of their employees’ FICA withholding requirement (the 6.2% payroll tax). This is double the amount allowed under prior law. This can be quite a benefit, as in their early years, start-up companies generally do not have any taxable profits for the research credit to offset; quite often, it is in these early years when companies make expenditures that qualify for the research credit. This can substantially help these young companies’ cash flow.

Research Credit – The research credit is equal to 20% of qualified research expenditures in excess of the established base amount. If using the simplified method, the research credit is equal to 14% of qualified research expenditures in excess of 50% of the company’s average research expenditures in the prior three years.

Qualified Research – Research expenditures that qualify for the credit generally include spending on research that is undertaken for the purpose of discovering technological information. This information is intended to be useful in the development of a new or improved business component for the taxpayer relating to new or improved functionality, performance, reliability, or quality.

Qualified Small Business (QSB)– To apply the research credit to payroll taxes, a company must be an aQSB and must not be a tax-exempt organization. A QSB for purposes of this credit is a corporation or partnership with these criteria:

  1. The entity does not have gross receipts in any year before the fourth preceding year. Thus, the payroll credit can only be taken in the first 5 years of the entity’s existence. However, this rule does not require a business to have been in existence for at least 5 years.
  2. The entity’s gross receipts for the year when the credit is elected must be less than $5 million.

Any person (other than a corporation or partnership) is a QSB if that person meets the two requirements above after taking into account the person’s aggregate gross receipts received for all the person’s trades or businesses.

Example – The taxpayer is a calendar-year individual with one business that operates as a sole proprietorship. The taxpayer had gross receipts of $4 million in 2022. For the years 2018, 2019, 2020, and 2021, the taxpayer had gross receipts of $1 million, $7 million, $4 million, and $3 million, respectively; the taxpayer did not have gross receipts for any taxable year prior to 2018. The taxpayer is a qualified small business for 2022 because he had less than $5 million in gross receipts for 2022 and did not have gross receipts before 2018 (the beginning of the 5-taxable-year period that ends in 2022). The taxpayer’s gross receipts in the years 2018-2021 are not relevant in determining whether he is a qualified small business in the taxable year 2022. Because the taxpayer had gross receipts in 2018, the taxpayer will not be a qualified small business for 2023, regardless of his gross receipts in that year.

The research credit must first be accrued back to the preceding year, where it must be used to offset any tax liability for that year. Then, the excess, up to $500,000 maximum, (up from a maximum of $250,000 in years before January 2023) can be used to offset the 6.2% employer payroll tax. Any amount not used is carried forward to the next year.

This expanded R&D tax credit won’t show up on tax returns until 2024 since it can first be claimed for the tax year 2023.

If you have questions related to the research credit or if your business could benefit from using the credit to offset payroll taxes, please give this office a call.

Health Savings Accounts Fill Multiple Tax Needs

The Health Savings Account (HSA) is one of the most misunderstood and underused benefits in the Internal Revenue Code. Congress created HSAs as a way for individuals with high-deductible health plans (HDHPs) to save for medical expenses that are not covered by insurance due to the high-deductible provisions of their insurance coverage.

However, an HSA can act as more than just a vehicle to pay medical expenses; it can also serve as a retirement account. For some taxpayers who have maxed out their retirement-plan options, an HSA provides them another resource for retirement savings – one that isn’t limited by income restrictions in the way that IRA contributions sometimes are.

Although the tax code refers to these plans as “health” savings accounts, they can also be used for retirement, as there is no requirement that the funds be used to pay medical expenses. Thus, a taxpayer can pay medical expenses with other funds, thus allowing the HSA to grow (through account earnings and further tax-deductible contributions) until retirement. In addition, should the need arise, the taxpayer can still take tax-free distributions from the HSA to pay medical expenses.

Withdrawals from an HSA that aren’t used for medical expenses are taxable and – depending on the taxpayer’s age – can be subject to penalty. Once a taxpayer has reached age 65, nonmedical distributions are taxable but not subject to a penalty (the same as for a traditional IRA once the IRA owner reaches age 59½). At the same time, regardless of age, a taxpayer can always take tax-free distributions to pay medical expenses.

Example: Henry is age 70 and has an HSA account from which he withdraws $10,000 during the year. He also has unreimbursed medical expenses of $4,000. Of his $10,000 withdrawal, $6,000 ($10,000 – $4,000) is added to Henry’s income for the year, and the other $4,000 is tax-free.

Eligible Individual – To be eligible for an HSA in a given month, an individual:

  1. must be covered under an HDHP on the first day of the month;
  2. must NOT also be covered by any other health plan (although there are some exceptions);
  3. must not be entitled to Medicare benefits (i.e., generally must be younger than age 65); and
  4. must not be claimed as a dependent on someone else’s return.

Any eligible individual – whether employed, unemployed or self-employed – can contribute to an HSA. Unlike with an IRA, there is no requirement that the individual have compensation, and there are no phase-out rules for high-income taxpayers. If an HSA is established by an employer, then the employee and/or the employer can contribute. Family members or any other person can also make contributions to HSAs on behalf of eligible individuals. Both employer contributions and employee contributions made via the employer’s cafeteria plan are excluded from the employee’s wage income. Employees who make HSA contributions outside of their employers’ arrangements are eligible to take above-the-line deductions – that is, they don’t need to itemize deductions – for those contributions.

The Monetary Qualifications for an HDHP –



health savings accounts

Example – Family Plan Does Not Qualify: Joe has purchased a medical-insurance plan for himself and his family. The plan pays the covered medical expenses of any member of Joe’s family if that family member has incurred covered medical expenses of over $1,000 during the year, even if the family as a whole has not incurred medical expenses of over $2,800 during that year. Thus, if Joe’s medical expenses are $1,500 during the year, the plan would pay $500. This plan does not qualify as an HDHP because it provides family coverage with an annual deductible of less than $2,800.

Example – Family Plan Qualifies: If the coverage for Joe and his family from the example above included a $5,000 family deductible and provided payments for covered medical expenses only if any member of Joe’s family incurred over $2,800 of expenses, the plan would then qualify as an HDHP.

Maximum Contribution Amounts – The amounts that can be contributed are determined on a monthly basis and are calculated by dividing the annual amounts shown below by 12. Thus, if an individual’s health plan only qualified that person for an HSA for 6 months out of the year, then that person’s contribution amount would be half of the amount shown.

health savings accounts

In addition to the amounts shown, an eligible individual who is age 55 and older can contribute an additional $1,000 per year.

How HSAs Are Established – An eligible individual can establish one or more HSAs via a qualified HSA trustee or custodian (an insurance company, bank, or similar financial institution) in much the same way that an individual would establish an IRA. No permission or authorization from the IRS is required. The individual also is not required to have earned income. If employed, any eligible individual can establish an HSA, either with or without the employer’s involvement. Joint HSAs between a husband and wife are not allowed, however; each spouse must have a separate HSA (and only if eligible).

If you have questions related to how an HSA could improve your long-term retirement planning or health coverage, please call this office.

If You Want to Maximize Your Social Security Income, You Need to Start Planning Now

According to one recent study, about 27% of people in the United States between the ages of 55 and 67 years old have less than $10,000 saved for retirement. If you needed just one statistic to outline how important it is to plan ahead when you’re younger, let it be that one.

Similarly, you need to understand that planning isn’t about simply making sure that you CAN retire. It’s also about doing what you can to maximize those benefits when they do start to arrive. The system itself is designed to reward certain actions and, if you make the right financial decisions today, you’ll be able to succeed after you retire.

Thankfully, getting to that point isn’t necessarily as difficult as many believe it to be. If your goal is to maximize your Social Security benefits by planning ahead, all you need to do is keep a few key things in mind.

Maximize Your Social Security, Maximize Your Retirement

One of the most important reasons why you want to start planning now about what your retirement years look like comes down to the fact that a lot of the decisions you’ll be faced with aren’t ones you can make overnight.

Case in point: the choice of when, exactly, you’ll end up formally retiring. While it’s undoubtedly true that you’ve already worked incredibly hard and would probably like to retire sooner rather than later, it isn’t always necessarily a good idea to do so. The longer you delay your retirement, the bigger those benefits get.

Everybody has a “full retirement age” which, as the term suggests, is when you get to start collecting your full benefits. Full benefits are dictated based on how much money you’ve earned in your lifetime. If you retire before you hit this age, you’ll still get money – but you won’t get as much as you would if you had delayed.

If your full retirement age is 67, and you retire at 62, for example. You’ll only get 70% of your benefits. If you wait until the age of 70 to retire, you’ll get 124% of your benefits.

However, this may not be an easy choice to make depending on what you have going on in your life (with your health being a top consideration), which is why you should start thinking about it and planning now.

Another reason why it’s so important to start planning today to maximize your Social Security income has to do with how the system works, to begin with. Remember that while your age is important, ultimately it is the amount of money that you make that will dictate how much you get in benefits after you retire.

Therefore, the more you make, the more you’ll eventually get. While “make more money” may seem like obvious advice if you still have 30 years before you retire simply keeping this in mind could influence a lot of the decisions you’ll make during your career. It may be a motivating factor when deciding to move from one employer to the next, or whether you should switch careers altogether. Again, these are not decisions that will come to you instantly – they’ll take a lot of careful consideration to get right which is why you should always be proactive.

Planning is also critical to maximize your income because it allows you to work certain elements into your long-term strategy that may have otherwise gone overlooked. Case in point: spousal benefits. If you happen to be married but haven’t earned too much in the way of your own income during your relationship, you might be able to sign up for what is called spousal benefits. This allows you to get up to 50% of your husband or wife’s eligible amount after you retire. Even divorced people are eligible for spousal benefits, so long as they haven’t gotten married to someone else.

Dependent benefits are similar in concept, albeit from a different perspective. If you’re about to retire but still have a dependent who is under 19 years old, they may be able to get up to 50% of your benefits without decreasing the amount of money you get, too.

As so much of success in terms of retirement involves a solid long-term financial strategy, it stands to reason that these are all things that you’ll want to incorporate now so that you can reap the benefits (no pun intended) later on.

Finally, one of the biggest reasons why planning ahead will help you maximize your financial strategy is because it helps bring your spouse into the conversation as early on in the process as possible.

If you’re married, both of you will eventually retire. Depending on your situation, it may make more sense for one of you to delay collecting Social Security benefits while the other retires either at or possibly even before their “full benefits age.” In some scenarios, this would be a way to protect whoever makes less money.

You won’t know whether this is the case, however, if you don’t A) plan your retirement alongside that spouse, and B) start planning as soon as you’re able to. Doing so will allow you to come up with the type of joint strategy you need to make sure that both of you can retire without worry or regret when the time comes.

Your Financial Future Begins Now

In the end, it’s pivotal to understand that retirement success is all about playing the long game. It’s not like you’ll just hit a certain day on the calendar, leave your job for the last time and everything is guaranteed to go smoothly from there on out.

If you truly want to enjoy the retirement lifestyle you’ve always seen for yourself, you need a financial plan. You need to look at the moves you’re making as an investment in your future. That requires not just the best strategy to help accomplish your goals but years of action to get to that point.

Ultimately, that’s why if you want to maximize your Social Security income, you need to start planning – not next year, not six months from now, but today.

October Extended Due Date Just Around the Corner

If you could not complete your 2021 tax return by April 18, 2022 and are now on extension, that extension expires on October 17, 2022. Failure to file before the extension period runs out can subject you to late-filing penalties.

There are no additional extensions (except in designated disaster areas), so if you still do not or will not have all the information needed to complete your return by the extended due date, please call this office so that we can explore your options for meeting your October 17 filing deadline.

Although the October due date is normally October 15th, for 2022, the 15th falls on a weekend, so the due date automatically moves to the next business day which is Monday October 17th.

If you are waiting for a K-1 from a partnership, S-corporation, or fiduciary return, the extended deadline for those returns is September 15 (September 30 for fiduciary returns). So, you should probably make inquiries if you have not received that information yet.

Late-filed individual federal returns are subject to a penalty of 5% of the tax due for each month, or part of a month, for which a return is not filed, up to a maximum of 25% of the tax due. If you are required to file a state return and do not do so, the state will also charge a late-file penalty. The filing extension deadline for individual returns is also October 17 for most states.

In addition, interest continues to accrue on any balance due, currently at the rate of .5% per month.

If this office is waiting for some missing information to complete your return, we will need that information at least a week before the October 17 due date. Please call this office immediately if you anticipate complications related to providing the needed information, so that a course of action may be determined to avoid the potential penalties.

Additional October 17, 2022, Deadlines – In addition to being the final deadline to timely file 2021 individual returns on extension, October 17 is also the deadline for the following actions:

  • FBAR Filings – Taxpayers with foreign financial accounts, the aggregate value of which exceeded $10,000 at any time during 2021, must file electronically with the Treasury Department a Financial Crimes Enforcement Network (FinCEN) Form 114, Report of Foreign Bank and Financial Accounts (FBAR). The original due date for the 2021 report was April 18, 2022, but individuals have been granted an automatic extension to file until October 17, 2022.
  • SEP-IRAs – October 17, 2022, is the deadline for a self-employed individual to set up and contribute to a SEP-IRA for 2021. The deadline for contributions to traditional and Roth IRAs for 2021 was April 18, 2022.
  • Special Note – Disaster Victims – If you reside in a Presidentially declared disaster area, the IRS provides additional time to file various returns and to make payments.

Please call this office for extended due dates of other types of filings and payments and for extended filing dates in disaster areas.