Review three expert opinions in their respective fields as they walk through the Tax Cuts and Jobs Act (TCJA), international tax opportunities, and R&D tax credits of 2017/2018.
In 2018, the Rhode Island Manufacturers Association (RIMA) hosted a presentation on Tax Cuts and Jobs Act (TCJA), international tax opportunities, and R&D tax credits. DiSanto, Priest & Co. spoke about the TCJA and international tax opportunities, highlighting the impacts these have on manufacturers. When you download this presentation, you’ll learn:
- TCJA: Important dates, corporate reform, individual reform, and planning considerations
- International Tax Opportunities: Change to hybrid territorial tax system, mandatory repatriation tax, and the new focus on non-routine returns (GILTI and FDII)
- R&D Tax Credits: History and overview of the research credit, manufacturing examples case studies, calculating credit, and legislative updates
With the passage of the Inflation Reduction Act in August of 2022, several changes to the tax laws have been made in response to green initiatives pushed forth by the legislative and executive branches of government. One of these new guidelines is a change to the Energy-Efficient Commercial Buildings tax deduction, also known as the Section 179D tax deduction, which originally took effect in 2006. The tax deduction was made permanent in 2020 through legislation, and for calendar year 2023, has been incentivized further with the Inflation Reduction Act.
Section 179D is primarily comprised of three different sections of improvements: building envelope, HVAC, and lighting. To qualify for the tax deduction, the improvements must meet ASHRAE standards and be certified by a qualified individual sanctioned by the IRS. If the plans are to “retrofit” an already existing building, then the building must be located within the United States and be at least five years old at the time of the retrofit planning.
For 2023, the scope and value of the tax deduction will be increased, allowing for a greater deduction amount along with a lower bar for entry for some eligible taxpayers. The new act has made three meaningful changes to Section 179D:
- Modifying the efficiency standard from 50% down to 25%,
- Altering the maximum allowable deduction per square foot, and
- An alternate election deduction for energy efficient retrofitting.
The new law aims to improve building energy efficiency by a minimum of 25%, but any improvements in efficiency over the 25% but not exceeding a credit rate of $5.00 per square foot will increase the benefit for the taxpayer. The new law also allows for taxpayers to take the tax deduction in the year the retrofitting plan is solidified into a qualified retrofit plan, opting for an earlier benefit than previously allowed.
Finally, tax-exempt entities are also allowed to allocate the credit to the person primarily responsible for designing the property in lieu of the ownership of the property, which will give tax-exempt entities an effective discount.
For more information on this and other energy tax incentives, give us a call at (401)-921-2000 or fill out our online contact us form to get started.
The Probate and Family Courts require the completion of a financial statement; this financial statement is required in all matters involving a marital dissolution (divorce), support (alimony and child), and other financial matters.
Why is this document so important? It is extremely important for a few reasons:
- This document will become part of a permanent record;
- This document will be used as a benchmark for future support modifications;
- This document will be used to divide all marital assets; absent extraordinary circumstances, the division of marital assets is a FINAL distribution, which cannot be modified or changed.
This document will be used to decide a divorcing individual’s financial future; therefore, it requires the proper time and attention to make certain the information is accurate and presented in the most appropriate manner. This document is signed under the penalties of perjury that the information is complete, true, and accurate.
The amount of an individual’s annual income before taxes determines if a short form (less than $75,000) or a long form (more than $75,000) financial statement needs to be prepared. If an individual is self-employed or has rental property additional forms (Schedule A and Schedule B) are required.
In my years of working in family law, I have reviewed and prepared numerous financial statements. Some of the repeated mistakes that are often observed include the following:
- Weekly v. Monthly Figures
- As one navigates through the financial statement pages, there are pages that request weekly figures and other pages that request monthly figures. Special attention should be given to ensure that the proper figure is reported.
- Self-Employment Income (Schedule A)
- There is confusion surrounding the term “self-employment.” Based upon my experience as a Certified Public Accountant and a litigation support professional, it is my belief that the Schedule A should only be utilized in matters that involve a sole-proprietorship (tax form Schedule C of Form 1040) or a partner of a partnership (Form 1065). Generally, self-employed individuals must pay self-employment tax; self-employment tax consists of Social Security and Medicare tax primarily for individuals who work for themselves.
- Therefore, the Self-Employment Income reported on Schedule A should NOT be utilized for business owners that are S-corporations, even though such individuals may consider themselves to be “self-employed” due to the fact that they are a business owner. The determining factor is not if you own the business, but how the business’ income is taxed to the individual and whether such income is subject to self-employment tax.
- It is worth noting that Schedule A uses mostly monthly figures, but it also includes a line item that is weekly (“weekly expenses”). Again, close attention is required in accurately completing said schedule.
Accurately reflecting an individual’s financial position along with one’s income and expenses can be complex, especially when there are multiple sources of income and business interests are involved. DiSanto, Priest & Co. has the experience and expertise to assist in preparing this very important document, so let our trained professionals help you and your clients prepare an accurate, well thought-out financial statement.
If you have any questions, please reach out to Pam Oliver via email, give us a call at (401) 921-2000, or fill out our online contact us form.
The Inflation Reduction Act of 2022 includes changes related to the credits for electric vehicles. If you are in the market for an electric vehicle, it is important to understand the new requirements to maximize the benefit of this credit.
Clean Vehicle Credit
Congress passed the new Clean Vehicle Credit under Section 30D to replace the Qualified Plug-In Electric Drive Motor Vehicle Credit. The new credit applies to the purchase of new electric vehicles after August 16, 2022. This credit will apply to all electric vehicles placed in service after 2022 and prior to 2033. The maximum credit for new electric vehicles remains unchanged at $7,500. The difference between Section 30D and the former credit revolves around limitations on the taxpayer’s income, limits on the vehicle’s price and manufacturing criteria for car makers.
Income limitation: The adjusted gross income (AGI) limitation determines who can take the credit. No credit is allowed if the taxpayer’s AGI exceeds the following threshold amounts:
- For married taxpayers filing a joint return or a surviving spouse, $300,000.
- For taxpayers filing as head of household, $225,000.
- For all other taxpayers (single, married filing separately), $150,000.
Limit on vehicle’s price: The new credit establishes a threshold for eligibility based on the manufacturer’s suggested retail price (MSRP) of the electric vehicles. No credit is allowed if the MSRP exceeds the following amounts:
- Vans, SUVs, and trucks must have an MSRP below $80,000.
- All other vehicles must have an MSRP below $55,000.
Manufacturing requirements: For vehicles to qualify for Section 30D, they must have a certain percentage of both critical materials and battery components made in North America. The credit will be reduced to $3,750 if only one requirement is met. The final assembly of the vehicle must also take place in North America.
It is also important to note that for vehicles placed in service after 2023, the taxpayer can choose to utilize the credit to reduce their tax liability when filing their taxes or transfer the credit to the dealer to directly lower the cost of the vehicle for an immediate benefit.
Previously-Owned Clean Vehicle Credit
The Act also includes a new 30% credit, up to a $4,000 maximum, for purchases of previously-owned clean vehicles after 2022 and before 2033 from dealers registered with the Secretary of Treasury. To qualify for the credit, the vehicle being purchased must be at least 2 years old and have a purchase price of less than $25,000.
A qualified buyer for purposes of the credit must have AGI below a certain threshold, cannot be a dependent of another taxpayer, or have claimed a credit for a used clean vehicle during the three-year period ending on the date of sale.
Income limitation: No credit is allowed if the taxpayer’s AGI exceeds the following threshold amounts:
- For married taxpayers filing a joint return or a surviving spouse, $150,000.
- For taxpayers filing as head of household, $112,500.
- For all other taxpayers (single, married filing separately), $75,000.
Give us a call at (401) 921-2000 or fill out our online contact us form if you would like more information on how to maximize the full value of this credit.
As a result of the recently passed Inflation Reduction Act, homeowners will have a greater incentive to invest in renewable energy sources in addition to reducing their energy costs and carbon footprint. One of the underlying goals of this bill was to promote investment in clean energy, and the government is hoping to stimulate this through offering tax credits. The Residential Clean Energy Credit, formerly known as the Residential Energy Efficient Property Credit, was recently extended to apply to property placed in service prior to January 1, 2035. For 2022, a 30% credit is available for the following eligible expenditures:
- Solar electric property
- Solar water heating property
- Fuel cell property
- Small wind energy property
- Geothermal heat pump property
- Biomass fuel property (but only through 2023)
Battery storage technology is also added to the list of qualified expenditures eligible for the credit, applicable to expenditures made after December 31, 2022.
The 30% tax credit is extended through the end of 2032. The credit will then be phased down to 26% in 2033 and to 22% for 2034.
The cost of the hardware and the expenses of installing the new system are also covered under this credit. Costs such as labor for on-site preparation, assembly, and installation of the equipment and for piping or wiring to connect it to your home may also be included.
This credit can be extremely beneficial to taxpayers as it may reduce their overall tax liability by up to 30% of their qualifying clean energy costs. In addition to this federal tax credit, there are other incentives offered by state and local governments as well as public utilities that may also help subsidize the costs of the investment. If you would like to discuss how your investment in a renewable energy system for your home may also deliver tax savings, give us a call at (401)-921-2000 or fill out our online contact us form.
The IRS has recently released the standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical, or moving purposes for the 2023 tax year as follows.
Beginning on January 1, 2023, the standard mileage rates for the use of a car will be:
- 65.5 cents per mile driven for business use, up 3 cents from 2022
- 22 cents per mile driven for medical or moving purposes for qualified active-duty members of the Armed Forces, consistent with 2022 increased rate
- 14 cents per mile driven in service of charitable organizations. The rate remains unchanged from 2022
As a reminder, the IRS states that under the Tax Cuts and Jobs Act, taxpayers cannot claim miscellaneous itemized deductions for any unreimbursed employee travel expenses as well as claim any deduction for moving expenses, unless they are active-duty members of the Armed Forces who are moving under orders to a permanent change of location.
If you have any questions, please reach out via email, give us a call at (401)-921-2000 or fill out our online contact us form.
For tax periods beginning after December 31, 2022, Rhode Island businesses may be required to electronically file returns and remit tax payments, including quarterly estimates, extension payments, balances due and all other payments. If your business meets the larger business registrant definition below, this new mandate will apply to your business. “Larger business registrant” for the purposes of this mandate is defined as:
- A business whose combined annual liability for all taxes administered by the Division of Taxation is or exceeds $5,000; or
- A business whose annual gross income is over $100,000
The Division of Taxation encourages all taxpayers to utilize the Taxpayer Portal to remit taxes. New and first-time users of the Taxpayer Portal will need to request a PIN before activating a new account. PINs can be requested by phone at (401) 574-8484 or e-mail (taxportal@tax.ri.gov). Have the following information available when requesting a PIN: Name of the business, EIN, and address. The PIN will then be sent to the taxpayer via regular mail. The account will not be available for use until the PIN is received and the account validated, so please ensure ample time to guarantee no problems with activating the account before the deadline. PINs will not be e-mailed or provided by phone.
For those taxpayers who do not receive a PIN and validate their account prior to a payment due date, a same-day guest service is available on the Portal. Please note, this will require several verification steps for security purposes and is not a permanent solution.
Instructional videos are available on the Division’s website to walk you through the process of creating an account.
More Information
If you have any questions on the above and how it applies to you, please call us at 401-921-2000, or reach us through email or complete our online contact form.
As part of the Inflation Reduction Act, Congress recently extended and expanded what was previously known as the Non-Business Energy Property Credit. The credit, now known as the Energy Efficient Home Improvement Credit, is intended to encourage investment in energy related home improvements such as energy efficiency improvements, residential energy property expenditures, and home energy audits. Prior to 2022, this credit was considered a lifetime credit. In other words, each year a 10% credit was allowed on qualifying expenses until the taxpayer reached a cumulative maximum amount of $500. This credit had originally expired as of December 31, 2021, but the Inflation Reduction Act extended it through the end of 2022.
Then, starting in 2023, the Inflation Reduction Act makes several substantial changes to the credit. The first is by removing the $500 lifetime cap limitation and replacing it with an annual limitation of $1,200. In addition, the former 10% credit percentage has been increased to a credit of 30% of qualifying expenses up to the $1,200 annual limitation. Qualifying expenses include water heaters, heat pumps, central air conditioners, hot water boilers, biomass stoves, oil furnaces, air sealing, cost of home energy audits, and electrical panels. There is an annual limit of $600 of credits with respect to residential energy property expenditures, windows and skylights, and $250 for any exterior door ($500 in total for all exterior doors). Also, the annual credit is increased to up to $2,000 for specified heat pumps and biomass stoves. Finally, roofs and advanced main air circulating fans are ineligible for the credit.
It is important to note that starting in 2025, reporting requirements mandate that manufacturers label, and taxpayers report, a product identification number associated with specified property items to receive the credit. These changes are expected to provide an incentive for taxpayers to lessen the high costs of energy and save in utility bills in addition to decreasing their overall tax liability.
If you have any questions on how you can utilize this credit or whether you qualify, give us a call at (401) 921-2000, or fill out our online contact us form.
The IRS has recently released the inflation-adjusted contribution limits, phase-out ranges, and income limits for various retirement-related items for the 2023 tax year as follows.
401(k), 403(b), most 457 plans, and the Thrift Savings Plan
The annual limitation on elective deferrals (contributions) for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan, as well as the catch-up contributions available to taxpayers aged 50 and over has been indexed for inflation to the following amounts:
- Elective deferral limit has increased by $2,000 to $22,500, up from $20,500.
- Catch-up contributions for taxpayers aged 50 and over increased by $1,000 to $7,500.
As a result of these changes, taxpayers aged 50 and over participating in these plans may contribute up to $30,000 in 2023.
SIMPLE Plans
The amount taxpayers can contribute to SIMPLE retirement accounts has increased by $1,500 to $15,500. The catch-up contribution limit for SIMPLE retirement accounts has increased from $3,000 to $3,500.
IRA’s
The maximum IRA contribution has increased from $6,000 to $6,500, with the catch-up contribution amount remaining at $1,000.
Taxpayers can deduct contributions to a traditional IRA if they meet certain conditions. If either the taxpayer or the taxpayer’s spouse were covered by a retirement plan at work during the year, the deduction may be reduced, or phased out depending on the taxpayer’s filing status and income. If neither the taxpayer nor their spouse is covered by a retirement plan at work, then the phase-out rules do not apply. The income limitations for deductible contributions to a traditional IRAs have been increased to the following amounts:
- For single taxpayers who are covered by a workplace retirement plan, the income phase-out range is now $73,000 to $83,000, an increase of $5,000.
- For married couples filing jointly, where the spouse who makes the IRA contribution is covered by a workplace retirement plan, the income phase-out range is now $116,000 to $136,000, an increase of $7,000.
- For married couples filing jointly, where the spouse who makes the IRA contribution is not covered by a workplace retirement plan, the income phase-out range is now $218,000 to $228,000, an increase of $14,000.
- For a married individual filing a separate return, the income phase-out range is not indexed for inflation and remains at $0 to $10,000.
The income phase-out range for taxpayers making contributions to a Roth IRA has also increased as a result of the annual cost-of-living adjustment:
- For single and heads of household filers, the income phase-out range is now $138,000 to $153,000, an increase of $9,000.
- For married couples filing jointly, the income phase-out range is $218,000 to $228,000, an increase of $14,000.
- For married couples filing separately, the income phase-out range is not subject to the annual cost-of living adjustment and remains at $0 to $10,000.
Saver’s Credit (Retirement Savings Contribution Credit)
The 2023 income limit for the Saver’s Credit increased as follows:
- For singles and married couples filing separately, the limitation has increased to $36,500.
- For heads of household, the limitation has increase to $54,750.
- For married taxpayers filing jointly, it has increased to $73,000.
If you have any questions, please reach out via email, give us a call at (401) 921-2000, or fill out our online contact us form.
The Internal Revenue Service has announced the increases in the annual gift tax exclusion and the lifetime estate and gift tax exemption for calendar year 2023.
The annual gift tax exclusion allows taxpayers to transfer gifts to unlimited donees without experiencing gift taxes up to a designated annual amount. The lifetime estate and gift tax exemption provides the limit for lifetime gifts as of the date of the gift or date of death before incurring a gift or estate tax liability.
For the 2023 tax year, the annual gift tax exclusion is increased by $1,000 to a total of $17,000. The exclusion covers gifts an individual makes to each donee per year. Married taxpayers can combine their gift tax exclusion as they can share their two annual exclusions. For example, married taxpayers with three children could potentially transfer $34,000 a year to each child or a total of $102,000 without incurring any gift taxes.
The annual gift tax exclusion is also an important consideration for estate planning purposes. Taxpayers can make gifts up to that amount before utilizing any of their lifetime estate and gift tax exemption. The value of any gifts in excess of the annual gift tax exclusion would then be subtracted from the lifetime exemption. As the lifetime exemption gets used over the taxpayer’s lifetime, the amount that can be excluded from the taxable estate upon death also decreases. For 2023, the lifetime exemption will increase by $860,000 to $12,920,000. The total available to a married couple will be $25,840,000 in 2023.
If you have any questions regarding estates, gifts, or any topics in this area, give us a call at (401)-921-2000 or fill out our online contact us form to get started.