Social Security Wage Limits

The maximum earnings subject to FICA withholding is $160,200 for 2023.  All covered wages will be subject to Medicare tax at 1.45%. There is an additional .9% surtax on wages over a threshold amount (MFJ $250,000; MFS $125,000; Single/HOH/QW $200,000).

For 2024, the maximum earning subject to FICA is $168,600.

Top Tax Bracket for Additional Medicare Taxes

Workers with wages and other employee compensation and/or net self-employment earnings that exceed $200,000 ($250,000 for married taxpayers; $125,000 if married filing separately) will be subject to the 0.9% Medicare surtax. Employers are required to withhold the tax when the employee's wage exceeds $200,000 for the year, regardless of whether the employee is subject to the tax or not. The difference between the actual tax liability and the actual tax is reconciled on your tax return. 

Net Investment Income Tax

Individuals who have both net investment income and modified adjust gross income of at least $200,000 ($250,000 for joint taxpayers; $125,000 for married filing separately) may be subject to this 3.8% tax. Net investment income includes items like interest, dividends, capital gains, rental and royalty income. It does not include income from sources such as wages, unemployment compensation, operating income from a non passive business, social security benefits, alimony, tax-exempt interest, and self-employment income.

This tax was retained in the 2018 tax cut signed in late December, 2017.

 

Affordable Care Act: Tax Reporting

For the Tax Cut and Jobs Act of 2018, the PENALTY for not having health insurance has been eliminated in 2019, but the MANDATE remains.  You are still REQUIRED to have health insurance because the Affordable Care Act has not been repealed or replaced at this time, but you will not be charged a penalty for not having it and there is no longer a health insurance box to check on the federal return. However, if you or your dependents received health insurance from the marketplace and claimed the premium tax credit, you must file a tax return. Make sure that you include your 1095-A form with your tax documents so that we can report it on your return.
 

Energy Credits for Your Home and Car - NEW for 2023 and Beyond!

There are lots of new and improved energy credits available in 2023 from your home to your electric car. The big increases are all for tax years starting in 2023, but Congress did extend the expiring credits from 2021 into 2022. Let’s hope you waited until 2023 to make a lot of energy improvements!

Taxpayers now have two Residential Energy Credits available: Energy Efficient Home Improvements (up to $3,200) and Residential Clean Energy Property Credits. The Clean Vehicle Credit (up to $7,500, based on certain requirements) is also available to taxpayers for both new and used electric vehicles. There are many rules and limitations surrounding these credits, so be prepared to provide receipts and other documents so we can be sure you are receiving the proper credits.

The Energy credits are for your Main Home (not rental properties) and you must live in the home. Items must meet particular IRS requirements to qualify (see irs.gov for more details). Roofs and garage doors no longer apply.

Items that qualify as Energy Efficient Home Improvements include: Exterior doors, windows or skylights, Insulation, Central a/c, Water Heaters, Furnaces, Boilers, Heat Pumps, and Biomass Stoves or boilers. A professional Home Energy Audit also falls into this category. To claim this credit, you must be the Owner of the home.

Items that qualify as Residential Clean Energy Improvements include: Solar Electric Panels, Solar Water Heaters, Fuel Cells, Battery Storage Technology, Geothermal Heat Pumps and Wind Turbines. To claim this credit, you must either be an owner of the home or pay rent. Again, this is for your main home (not a rental property).

The tax credit for Electric and Fuel Cell Vehicles have changed quite a bit for 2023. Cars eligible for this credit must have been placed into service in 2023 meaning you must have taken delivery of the vehicle in 2023 - cars purchased in 2022 are not eligible. All sellers are required to report taxpayer name and SSN to the IRS in order to claim the credit. New and Used EV or FCV vehicles must be purchased through a dealership and meet particular requirements. The maximum sticker price (MSRP) for new van/SUV/pickups is $80,000; maximum MSRP all other new vehicles is $55,000. For used cars, Maximum sales price cannot exceed $25,000, must be year 2021 or earlier (this is for the 2023 tax year). Taxpayers claiming the credit for used cars may not be claimed as a dependent. For all cars purchased, taxpayers claiming the credit are subject to certain income limits. Furthermore, the amount of the credit will vary depending on when you took delivery of the car (Jan 1, 2023 - April 17, 2023 or April 18, 2023 - Dec 31, 2023.) Make sure that you have receipts and other documentation available when completing your tax return to help determine eligibility for the credit.

You may be eligible for a credit if you Add an EV Charger to your home. However, this credit is only available to you based on where you live (Location, location, location!).

Earned Income Tax Credit Reminder...

If you are claiming the EITC on the basis of a qualifying child, you must provide certain documents per IRS requirements. Some of those documents include, but are not limited to: school records, health care provider statements, medical records, and bank statements. Make sure that your child's name and address are on these statements.  

Reduced Hurdle for Medical Deductions

One item that changed with the Tax Cut Act of 2018, is the reinstatement of the 7.5% of your AGI floor of your medical expenses.  Set to be increased to 10%, late in December, 2019, Congress decided to keep this rate at 7.5% for all taxpayers, regardless of age.

Simplified Home Office Deduction

Your qualified home office is easier to deduct thanks to the simplified method option. The maximum deduction is $1,500 ($5 per sq feet up to 300 sq feet). The simplified method is an option to those taxpayers who do not wish to pro-rate and depreciate expenses under the traditional home office rules. Taxpayers must still meet all the requirements to claim the deduction.

For those of  you who were taking this deduction as an unreimbursed business expense from your employer, you will no longer be able to deduct business expenses for tax years 2018-2025 because the Miscellaneous Business Expense Deduction has been eliminated from your Schedule A (Itemized Deductions).  You should ask your employer to offer an accountable plan so that you can receive reimbursements for your expenses directly from your employer. (Employees may be able to deduct certain expenses on their state tax returns. Pennsylvania recognizes some business employee expenses, for example.)

For those of you who are self-employed, you may continue to deduct these expenses, where applicable, on your Schedule C.

To be clear, for those employees working from home during the pandemic, you may be able to deduct your home office on your state return (possibly Pennsylvania), but not on the federal return. Pennsylvania does not recognize the simplified home office deduction as described above, however.

Health Savings Accounts

An "above-the-line" 2023 deduction is available for contributions made to Health Savings Accounts by April 15, 2024. For tax year 2024, the amount is limited to not more than the annual deductible of the health plan, to a maximum of $4,150 for singles ($8,300 for families). 

Plan	2024	2023
Self Only	$1,600 - $4,150	$1,500 - $3,850
Self Only, +55	Max: $5,150	Max: $4,850
Family	$3,200 - $8,300	$3,000 - $7,750
Family, +55	Max: $9,300	Max: $8,750

Estate Taxes

For 2023, the estate tax exemption is $12,920,000.  This is the amount an individual can leave to his or her heirs without paying any federal estate or gift tax. In addition, if any applicable exclusion amount remains unused as of the death of a spouse, the surviving spouse may add this unused amount to his or her own estate tax exemption. The American Taxpayer Relief Act permanently allows for inflation adjustments. For 2024, the estate tax exemption is $13,610,000.

The annual gift tax exclusion is $17,000 for 2023 and $18,000 for 2024.  

Split Refunds into Several Accounts

You may directly deposit your federal refund in up to 3 different financial accounts. Choose savings, checking, or brokerage accounts including your IRA, HSA, MSA or ESA. Be sure to notify the IRA trustee of the tax year in which you want to make the contribution - contributions for 2023 must be made before 4/15/24.