Recent Tax Changes

It’s always a good idea to periodically check how much federal income tax you’re having withheld from each paycheck. This is especially important if your filing status changes because of marriage, divorce or the birth of a child; you or your spouse start or stop a second job; you have taxable income with no withholding (such as retirement income, unemployment compensation, capital gains or self-employment income). We encourage you to use the IRS’s Tax Withholding Estimator to perform a “paycheck checkup” to ensure you have the right amount of tax withheld from your paycheck. The online tool is available at https://apps.irs.gov/app/tax-withholding-estimator. 

An IRS online account makes it easy for people to quickly get the tax planning info they need. With the same ease that taxpayers have when banking online or placing an online shopping order, they can log in and get the latest on their payment history, balance, and more. 

Taxpayers can view information about their account including:

• Their payoff amount, which is updated for the current day 

• The balance for each tax year for which they owe taxes 

• Their payment history 

• Key information from their most current tax return as originally filed 

• Payment plan details if they have one 

• Digital copies of select IRS notices 

• Their address on file 

With an online account, taxpayers can also:

• Make a same day payment 

• Set up an online payment plan 

• Access tax records and transcripts 

• Authorize another person to represent them before the IRS or view their tax records 

• Approve and electronically sign Power of Attorney and Tax Information Authorization requests from their tax professional 

A taxpayer's balance will update no more than once every 24 hours, usually overnight. Taxpayers should also allow one to three weeks for payments to show in the payment history.

Third party settlement organizations (TPSOs), also known as payment apps and online marketplaces will be required to report transactions when the amount of total payments for those transactions is more than $5,000 in 2024; more than $2,500 in 2025; and more than $600 in calendar year 2026 and after. 

Notice 2024-85 announces for calendar year 2024, that the IRS will not assert penalties under section 6651 or 6656 for a TPSO’s failure to withhold and pay backup withholding tax during the calendar year. For calendar year 2025 and after, the IRS will assert penalties under section 6651 or 6656 for a TPSO’s failure to withhold and pay backup withholding tax. 

In late 2022, Congress passed a legislative package that included a series of bills known as SECURE 2.0, providing incentives for U.S. workers to save for retirement and making it easier for small businesses to offer retirement plans. The new law: • Raises the age for starting required minimum distributions (RMDs) to 73 for 2023 (and 75 in 2033) • Removes the requirement that owners of Roth IRAs take RMDs beginning in 2024 • Reduces the penalties for account holders who fail to take the required RMDs • Allows defined contribution retirement plans to add an emergency savings account • Requires businesses that start new 401(k) and 403(b) retirement plans to automatically enroll eligible employees beginning in 2025 • Allows employers to match employee contributions to Roth IRAs. 

The IRS reminds retirees 73 and older of the year-end deadline for taking Required Minimum Distributions (RMDs) from Individual Retirement Arrangements (IRAs) and other retirement plans. Many owners of IRA accounts and retirement plans are required to withdraw RMDs each year. These withdrawals are taxable income and may incur penalties if not taken on time. RMDs for Designated Roth accounts in 401(k) and 403(b) retirement plans were eliminated by the SECURE 2.0 Act, which also increased the age at which account owners must start taking RMDs. The minimum distribution rules commonly apply to original account holders and their beneficiaries in IRAs, retirement plans and Roth IRAs.

The IRS is allowing eligible taxpayers to use certain alternative methods to adequately identify units of a digital asset held in the custody of a broker that are sold, disposed of or transferred during 2025. In July of 2024, the IRS and Treasury Department issued final regulations providing ordering rules for determining which units of the same digital asset should be treated as sold, disposed of or transferred when a taxpayer holds multiple units of the same asset in the same wallet that were acquired at different times. The rules were to apply to acquisitions and dispositions of digital assets on or after Jan. 1, 2025.

Some digital asset brokers notified the IRS and Treasury Department that they might not have the technology needed to accept specific instructions or standing orders communicated by taxpayers by Jan. 1. The technology limitations would have left some taxpayers unable to make adequate identifications in conformity with the regulations.

Tax-advantaged educational savings accounts, also known as 529 plans, provide a way for parents to help their children or other family members save for college or to pay other educational expenses. However, not every beneficiary uses the full amount they paid into the plan. Beginning in 2024, the SECURE 2.0 Act allows beneficiaries to roll over unused funds into a Roth IRA without having to pay a penalty. However, there is a lifetime limit of $35,000 per beneficiary and the 529 account must have been open for at least 15 years. The rollover amount cannot exceed the beneficiary’s annual IRA contribution limit.

The premium tax credit (PTC) is available to individuals whose household income is between 100% and 400% of the federal poverty line. However, for 2021-2025, the credit may be allowed when household income exceeds 400% of the federal poverty line. Also, health care costs are limited to 8.5% of family household income for Marketplace-purchased health coverage only.

Energy efficient home improvement 

The energy efficient home improvement credit includes property placed in service after Dec. 31, 2022, and before Jan. 1, 2033 (§25C). The credit amount is 30% of the sum of the amount paid or incurred by the taxpayer for qualified energy efficiency improvements installed during the year and the amount of the residential energy property expenditures paid or incurred by the taxpayer during that year. The maximum annual limit is $1,200 for certain property in the aggregate. In addition, there are separate annual limits of $600 for qualified energy property, $600 for windows and skylights, $250 for each exterior door ($500 in total for all exterior doors) and $150 for home energy audits. A $2,000 annual limit applies in the aggregate to amounts paid for specified heat pumps, heat pump water heaters, and biomass stoves and boilers. The energy efficient home improvement credit is claimed on Form 5695, Residential Energy Credits, Part II.

There’s no lifetime dollar limit for the credit, so a taxpayer can claim the maximum amount each year until the credit expires in 2033.

Individuals were allowed the residential energy efficient property (REEP) credit for solar electric, solar hot water, fuel cell, small wind energy, geothermal heat pump and biomass fuel property installed in homes in years before 2024 [§§ 25D(a) and 25D(h)]. 

The IRA of 2022 extended the credit plus increased the credit amount to the following:

• 30% for property placed in service after Dec. 31, 2019, and before Jan. 1, 2033

• 26% for property placed in service after Dec. 31, 2032, and before Jan. 1, 2034

• 22% for property placed in service after Dec. 31, 2033, and before Jan. 1, 2035

These provisions generally apply to expenditures made after Dec. 31, 2021. The residential clean energy credit is claimed on Form 5695, Part I.

The credit for new clean vehicles can be as high as $7,500 (§30D). A qualified vehicle must have final assembly in North America, meet critical mineral or battery component requirements and have a minimum battery capacity of seven kilowatt hours. The seller must provide a report to the taxpayer and the IRS. The clean vehicle credit is claimed on Form 8936, Clean Vehicle Credit, and Schedule A (Form 8936), Clean Vehicle Credit Amount. Additionally, the credit requires the manufacturer’s suggested retail price (MSRP) for vans, SUVs and pickup trucks cannot exceed $80,000 ($55,000 for any other vehicle). In 2024, taxpayers can elect to transfer the credit to the dealer to reduce the purchase price. However, if their MAGI exceeds the limit, they must repay it. Schedule A (Form 8936) is used to reconcile the credit. Make sure to provide Form 15400, Clean Vehicle Seller’s Report, to your tax preparer. No credit is allowed if the taxpayer’s MAGI for the current year or preceding year (whichever is less) exceeds the following threshold amounts:

• $300,000 (MFJ, QSS)

• $225,000 (HOH)

• $150,000 (all others)

A list of eligible vehicles is available on the U.S. Department of Energy website. 

Credit for Previously Owned Clean Vehicles 

This credit is for taxpayers who purchase a previously owned clean vehicle after Dec. 31, 2022, and before Jan. 1, 2033 (§25E). The credit is the lesser of $4,000 or 30% of the vehicle’s sales price. The sales price cannot exceed $25,000 and the transaction must be through a dealer. The purchasing taxpayer is the first qualified buyer to claim the credit since Aug. 16, 2022, other than its original user. The previously owned clean vehicle credit is claimed on Form 8936 and Schedule A (Form 8936). No credit is allowed if the taxpayer’s MAGI for the current year or preceding year (whichever is less) exceeds the following threshold amounts:

• $150,000 (MFJ, QSS)

• $112,500 (HOH)

• $75,000 (all others)

A previously owned clean vehicle is a motor vehicle:• With a model year that is at least two years earlier than the calendar year in which the taxpayer acquires it

• That was originally used by someone other than the taxpayer • Acquired by the taxpayer in a qualified sale • Most of the same requirements apply but not all. This credit can also be transferred to the dealer, if so, you will need to provide Form 15400 and reconciliation is required on Schedule A (Form 8936).