Collins 2023 Tax Season Changes

2023 Tax Season with Collins Consulting

November 30, 2023 | Collins Consulting

As we approach the 2023 tax season, the Collins Consulting team has been very busy with continuing education and preparing for the new tax year. This coming tax season we will again be requiring all clients to complete our individual tax questionnaire. Since we do not know the many life changing events that could occur each year for you, the individual tax questionnaire will be very beneficial to let us know of any changes and provide a smooth and accurate tax preparation process. The questionnaire will be available within the coming weeks.

All tax documents will need to be provided via drop off, email, mail or fax:

For those clients that drop off documents, we ask them to drop off copies rather than the originals.

Please drop off, email, or fax all documents at one time.

A Collins Consulting tax preparer will contact you via phone or email to review your return before its finalized. Once the return is finalized with you, we will send the tax documents via DocuSign for you to e-sign and return. If you do not have access to a computer or prefer a paper copy of your return, you may request a paper copy for an additional fee and we can discuss your delivery choice at the time of your return review. From the DocuSign email, you should download to save or print a copy of your tax return.

Please complete the REQUIRED individual tax prep questionnaire before submitting your documents if you are filing personal taxes.

Please complete the REQUIRED business questionnaire and return to Collins with your tax documents if you are filing LLC/corporate taxes.

Generally, for a similar tax return as the prior year, you should expect about a 10% increase. 

 This year has brought a lot of changes and we would like to bring those to your attention along with changes scheduled for the future.

*subject to change before year end

  • Inflation adjusted tax schedules and standard deduction (approx. 7%)
  • Inflation adjusted social security income increase of 8.7%
  • IRA contribution  limit $6500 or $7500 for over age 50
  • Required Minimum Distribution (RMD) must start the year after turning age 73.
  • Gift limit - $17,000 – previously $16,000 - excess would require gift tax return
  • Business meals at restaurant 50% deductible – previously 100%
  • IRS interest rates for not paying timely increased from 3% to 8% per year
  • Business mileage rate 65.5 cents per mile

Energy Efficient Home Improvements:

  • The lifetime limit of $500 has been removed.  The limit for insulation, doors and windows is $1200 per year and the limit for heat pumps, water heaters and furnances is $2000 per year.

Energy Efficient Home Improvement Credit

   Annual Cost Maximum  Annual Credit Maximum
Insulation  $4000  $1200
One exterior door  $833  $250
All exterior door  $1667  $500
Windows  $2000  $600
 Central air conditioner  $2000  $600
Energy audit  $500  $150
(above excluding labor)    
Overall Maximum of above    $1200
Electric and natural gas heat pump    
Oil furnaces and water heater $6667 $2000
(including labor)

These annual Energy Efficient home Improvement Credit is limited to each individual's current year tax liability and excess is not carried forward to future tax returns.  This credit cannot be used for a newly constructed home.

Residential Clean Energy Credit:

Applies annually to Solar, Solar roofing tiles,  Wind, Geothermal and battery storage technology credit is 30% of cost with no maximum.

This tax credit is limited to an individual household's current year tax liability, but excess can be carried forward to future tax returns. This credit can be used for a new or existing home.

Residential Clean Energy Credit is applied to the current year tax liability before the Energy Efficient Home Improvements for 2023.

These energy efficient properties must meet Energy Star, Int’l Energy Conservation Code, Consortium for Energy Efficiency, Solar Rating Certification or kilowatt hours criteria or limits.  
(Since there are many details, we recommend doing research before major purchases) 

Clean Vehicle Credit-New Vehicles

  • Clean vehicle credit maximum cost for a new vehicle is $55,000 for auto or $80,000 for van, SUV or truck.
  • Taxpayer income limit of $150,000 for single or $300,000 for married. (Additional credit for commercial and used vehicles)
  • The credit limit for purchases before April 18, 2023 was $3751 but could be $7500 after that date, if the vehicle meets North American assembly and battery criteria limitations.
  • This credit is non-refundable and if credit is not used in 2023, no carryforward is allowed for personal use.
  • However, this credit can be carried forward for businesses vehicle purchases.
  • The quantity of vehicles sold limit has been removed.

Clean Vehicles Credit-Used Vehicle    

  • This tax credit has a maximum of $4000 and the vehicle must be purchased from a dealer, not an individual.
  • The credit is limited to 30% of the purchase price and the vehicle must be over 2 years old.
  • The credit is only available to a second owner and that owner must not have gotten this tax credit within the prior three years.
  • Income limits are half that of similar new vehicles or $75,000 and $150,000.
  • The credit is not refundable and does not carryforward to future years if it cannot be used in the current year.
  • There is a credit for new 2 wheel plug in vehicles for up to $2500.  This credit has similar criteria to the other vehicles and it is best to review before a purchase. 

Other Federal Tax Law Changes

  • Bonus depreciation 80% - previously 100% - no change to first year depreciation.
  • Virtual or digital currency continues to be treated as a capital asset that is required to be reported when sold.
  • Other income earned in digital activity could require reporting of self-employment income.
  • FinCen Returns: The Corporate Transparency Act requires filing a FinCen return to report ownership of corporations, partnerships or LLC.  Even though the first return for existing companie is due January 1st, 2025, we highly recomend filing the FinCen report at the same time as the tax return so it’s not overlooked.  This return is to report direct or indirect ownership of the company or LLC.  The penalty for failure to file is $500 a day capped at $10,000.
  • Employee Retention Credit processing was discontinued by the IRS on September 14, 2023 because of fraud issues related to this program.

Iowa 2023 Changes:

  • Iowa moves to tax reporting similar to federal – starting with federal taxable income – no deduction for federal income tax paid
  • Iowa lowered its maximum rate to 6% from 8.53%
  • Iowa resident retirement distributions are not taxable if taxpayer are over the age 55.
  • For S Corporations and LLC’s, Iowa offers a voluntary election to pay Iowa state taxes for its owners. This process allows for a reduction federal taxable income by the amount of state income taxes paid in the calendar year those taxes are paid.  This would be advantageous for taxpayers that do not itemize on the federal tax return, or state taxes paid plus home taxes exceed $10,000, so they cannot get a federal tax deduction for the state income taxes paid.  The individual taxpayer gets credit on their personal return for this payment made by the LLC or S Corporation.

2024 changes

  • 1099K is required to be filed and reported for online sales over $600 – previously $20,000 (i.e., Venmo, PayPal, Zelle, etc.) 
  • Inflation adjusted tax schedules and standard deduction (approx. 5.4%)
  • Inflation adjusted social security income increase of 3.2%
  • IRA contribution limit increase to $7000 or $8000 for over age 50.
  • Bonus depreciation declines from 80% to 60%.  No change in first year depreciation.
  • The Corporate Transparency Act requires filing a FinCen return to report ownership of corporations, partnerships or LLC.  This return is to report direct or indirect ownership of the company or LLC.  A new entity established in 2024 has only 30 days to file this report.  The penalty for failure to file is $500 a day capped at $10,000.
  • Iowa’s top tax rate deceased from 6% to 5.7%
  • 67 cents per mile driven for business use, up 1.5 cents from 2023
  • 21 cents per mile driven for medical or moving purposes for qualified active-duty members of the Armed Forces, a decrease of 1 cent from 2023
  • 14 cents per mile driven in service of charitable organizations; the rate is set by statute and remains unchanged from 2023

2026 changes

  • Medicare to start Prescription cost negotiation
  • The 2017 Tax Cuts and Jobs Act expires. If not renewed, federal tax rates will revert back to higher 2016 level (ie 12% to 15%, 22% to 25%, etc)
  • Qualified business income – 20% reduction
  • Estate Tax exemption of $11.2m reverts to 2016 level of $5.6m
  • Child tax credit decreases from $2000 to $1000 and new $500 over age 16 ends
  • Bonus depreciation declines from 40% to 20%.  No change in first year depreciation
  • Iowa is expected to have one unified state income tax rate of 3.9%

About Collins Consulting: Collins Consulting is a full-service tax and accounting firm, started in 1970 by Norm Collins in Treynor, Iowa. In August of 2018, TS Banking Group acquired Collins Consulting as a wholly-owned subsidiary.