2023 Client Letter

Greetings and Happy New Year! I hope this letter finds you well. Let me highlight some things that are new this year to help you prepare.

Let’s start with Required Minimum Distributions (RMD). The beginning RMD age has increased to age 73. If you turned 73 years young in 2023, you have to take your first RMD by April 1st. If you are turning 73 in 2024, you will have until April 1st of 2025 to take your first RMD, however doing so will have you taking 2 required distributions in the same year. This option will increase your income for that year, and has the potential of putting you in the next tax bracket. We can look at where you land in your current tax bracket when we meet, to see if it is in your better interest to avoid this potential pit fall.

The Residential Clean-Energy Credit is equal to 30% of qualified solar property, and more. The smaller Energy Efficient Home Improvement Credit for qualified insulation, doors, windows, central air, water heaters, etc., used to have a $500 lifetime limit. Now there is a general $1,200 yearly credit limit, but some specific upgrades have lower caps while others have larger ones. Staggering upgrades over multiple years may give you an overall larger credit than if you did them all at once.

The Clean Vehicle Credit is a non-refundable credit of up to $7500 for buying an electric vehicle. Non-refundable means it will only decrease your total income tax, not increase your refund, and the excess cannot be carried over. If you buy an EV in 2024, you can opt to monetize the credit by transferring it to the dealer at time of purchase, thus lowering the amount you will pay for the car. This allows you to take immediate advantage of the credit.

Some other note-worthy items, and frequently asked questions:

The annual gift tax exclusion has increased to $17,000. $34K if you are married.
The business standard mileage rate is $0.65, with no need to break it down between the first and second half of the year.
MA individuals are required to file if MA Gross Income is more than $8,000. This filing requirement is lower than the Federal minimum. Not new, just note-worthy.
If you can itemize deductions, charitable contributions are generally limited to 60% of AGI. Contributions in excess are carried over.
Remember, before your dependent rushes out and files, they need to file as a “Dependent Filer”. I will prepare their return at a reduced fee to help avoid a costly re-do.

I mentioned in my 2021 letter that it was a great idea to register for an IRS online account to access your individual account information including balance, payments, tax records and more. I am seeing an increasing need for needing an ID.ME account, which is your identity verification. You only have to go through the process once, but I am seeing this account being used in multiple areas for access. Just go to www.irs.gov

I could go on and on, with inflation adjustments and the like, but that may get windy! Let’s keep this short and sweet this year (also my attempt to conserve and keep costs down for both of us). In that vein, don’t forget your thumb drives is you elect for a pdf copy of your return. I look forward to seeing you soon!

Online extended version:

MA 2023 TAX RELIEF LEGISLATION

Earned Income Credit increased from 30% to 40% of Federal.
Rental deduction increased from $3,000 to $4,000.
Child & Family Tax Credit – Increased age to 13, equals $310 per dependent.
Circuit Breaker Credit increased to $2,590.
Septic Credit increased from $6,000 to $8,000.
Short Term Capital Gains decreased from 12% to 8.5%
Charitable Contribution Deduction – Does not include goods/clothing. Do not have to itemize on Fed to claim.
Commuter deduction – All MBTA fares. Bike purchases & improvements. Public Commuter Boats.
Lead Paint increased from $1,500 to $3,000.
4% Surtax on income over $1 million
Estates $2 million or less do not have to file.