Continuing from our previous communication, here is the second part of the summary of the income tax changes for 2023. These updates are critical for your tax planning and compliance:
Qualifying Surviving Spouse Filing Status:
A taxpayer may use this status for two years following the year of their spouse's death, subject to meeting five specific criteria.
Terminology Change for Virtual Transactions:
The term "virtual currency" on Form 1040 has been replaced with "digital assets," which are defined as digital representations of value on a cryptographically-secured ledger.
All filers of Forms 1040, 1040-SR, or 1040-NR must answer a question regarding transactions in digital assets.
Taxation of Digital Assets:
When receiving digital assets as payment for services, the income reported should be the U.S. dollar value of the digital assets at the time they are received.
Required Minimum Distributions (RMDs) Age Increase:
RMDs must begin at age 73 for individuals who reach age 72 after the year 2022.
RMD Excise Tax Reduction:
The excise tax for failing to take an RMD is decreased from 50% to 25%, with a further reduction to 10% for IRAs if the failure is corrected promptly.
Energy Efficient Home Improvement Credit:
A nonrefundable credit of up to 30%, capped at $1,200 annually, is available for specified energy-efficient home improvements.
There are limits on credit amounts for windows, skylights, doors, and energy audits.
Clean Energy Credits:
A credit for 30% of expenditures, up to $2,000, for the purchase of specific heat pump equipment and biomass stoves and boilers installed from January 1, 2023, until December 31, 2032.
Up to a $7,500 credit is available for new clean vehicles, depending on specific battery materials and components, subject to vehicle MSRP and taxpayer's modified adjusted gross income (MAGI).
Credit for Used Clean Vehicles:
A nonrefundable credit for purchasing a used clean vehicle is available, either $4,000 or 30% of the sale price (up to a $25,000 sale price), whichever is less. Eligibility is subject to the taxpayer's MAGI.
Please assess how these changes might affect your tax situation. Our team is here to help you understand these updates and provide the necessary guidance. Feel free to contact us with any questions or for further assistance.