Tax Update

CHANGES FOR 2022 and 2023
2022 has been another year with many challenges for most of us. As always we hope this letter finds you safe and healthy. We all hope for a better 2023.

On the tax law front, for the first time in a few years there have not been many changes that impact Tax Year 2022. There are some new things to be aware of for 2023, that we will touch on in this letter.

There are some items from past years that may still effect your 2022 personal tax return. These include distributions from retirement plans and reporting for Advanced Premium Tax Credit.

The areas we want to highlight for 2023 involve modifying and extending certain Energy Credits and a significant increase in the Standard Deductions and Tax Brackets.

There are some changes that will affect 2022 business taxes. These include an expansion for Form 1099K reporting and changes to the 2022 Standard Mileage Rate.

PERSONAL INCOME TAX

RETIREMENT PLAN DISTRUBUTIONS
If you took a Corona-Virus related distribution in 2020 and elected to include the distribution in income over 3 years the third and final installment will be included in 2022 income.

AFFORDABLE CARE ACT/PREMIUM TAX CREDIT
If you purchased health insurance from the Marketplace in 2022 you will still receive a Form 1095A. If you received an Advanced Premium Tax Credit that is also on the Form 1099A. If your income is higher than what you estimated to calculate your Advanced Credit you may have a repayment requirement. This form is still required to complete your 2022 return.

2023 STANDARD DEDUCTIONS AND TAX BRACKETS
The Standard Deductions and Tax Brackets are adjusted every year. Due to the high inflation over the past year the 2023 increases are the largest in over 30 years. The main point to consider on the increases is the impact on Federal Tax Withholding. The withholding tables are calculated using the standard Deduction and tax Bracket information. Due to this increase most people will see a reduction in Federal Tax Withheld in 2023. So you may need to adjust your
Federal withholding.

2023 ENERGY CREDITS
There are some existing energy credits that have been expanded beginning in 2023. They included the Residential Energy Credit and the Clean Vehicle Credit.

The Residential Energy Credit has been increased and expanded to include any residence not just a principal residence. The life time limit on the credit has been replaced with a annual limit. If you have used this credit in the past any future qualifying improvements may qualify for the credit.

The Clean Vehicle Credit has been modified beginning in 2023. The credit eliminates the per manufacturer limit for qualified vehicles. The vehicle must meet 2 component requirements to qualify. The credit for each requirement is $3,750. The maximum credit is $7,500. There are also income limits for the purchaser and limits on the cost of the vehicle to qualify.

There is also a credit for the purchase of a previously owned clean vehicle. The credit is the lesser of $4,000 or 30% of the purchase price. There are also income and purchase price limits for this credit as well.

BUSINESS INCOME TAXES
The requirement for Third Party Processors, to issue Form 1099K for business transactions was lowered to $600, This reporting requirement only applies to business transactions.

2022 Standard Mileage Rates:

Due to the cost of fuel the IRS raised the Standard Mileage rate for business and Medical use half way through 2022. The rate for business use was 58.5 cents per mile until June 30th and 62.5 cents per mile from July 1 to the end of the year. The medical use rate was 18 cents per mile until June 30th and 22 cents per mile from July 1 to the end of the year.

What to Bring to Bring to Your Tax Appointment
•    Federal, state, and local estimated payment vouchers.
•    W-2s, 1099s, SSA statement, or business records if you are self-employed.
•    Social security cards for you, your spouse, and dependents.
•    Date of birth for the taxpayer, spouse, and all dependents.