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+--- Topic: TAX CREDITS AND WHAT YOU NEED TO KNOW FOR THE 2023 TAX FILING YEAR (/thread-453.html)
TAX CREDITS AND WHAT YOU NEED TO KNOW FOR THE 2023 TAX FILING YEAR - My Northern Wisconsin - 02-15-2024
By: Davette Lynne Hrabak, CPA, CFE, CBM, ATA, ATP, ABA, ECS, CGMA, https://www.DavetteLynneHrabak.com
“When it comes to taxes, save the lion’s share; enter between the lions to get this special care.”
There are a number of credits and deductions available to taxpayers. The following four sections, (with each heading in bold for ease of reference), focus on tax credits, including the information you should bring to your tax preparer, the Earned Income Credit (sometimes available even if there are no qualifying children), the Homestead Credit, and a summary of many of the credits that are available.
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Davette Lynne Hrabak, CPA, located at 164 South Lake Avenue in Phillips, specializes in tax return preparation, business start-up services, consulting, bookkeeping, payroll, and all your accounting needs. Call <a href="tel:715-339-6638">715-339-6638</a> or visit <u><a href="https://www.DavetteLynneHrabak.com" target="_blank">Davette's website</a></u>. Follow her <u><a href="https://www.facebook.com/davettelynnehrabak" target="_blank">Facebook page</a></u>.
WHEN IN DOUBT, BRING IT IN AND BRING IT UP
There are so many credits and deductions available to taxpayers; many which individual or business taxpayers may not be aware of. Each person’s individual tax situation is unique. An individual that is lower income, someone who has kids, a person who owns and runs a business or a rental, or someone who has a combination of factors on their returns each have unique needs and unique deductions and credits.
It is virtually impossible for an individual to know what all is deductible and what is not on their own. Therefore, when you bring your items in to be prepared, do not hesitate to talk to your CPA. Mention any questions that you have and discuss what all has gone on in your year financially. Many times these conversations open a person up to finding out that they have more deductions and credits available to them than they thought. Remember there is no such thing as a stupid question.
Sometimes these helpful conversations can even lead to planning for the future. For example, maybe you have an item that would have been deductible had you taken certain steps in documenting it. The discussion would lead to letting you know what you can do for the following year to make next year’s taxes more bearable.
If you think you have an item that could be deductible, bring it up and ask about it. The worst thing that could happen in bringing it up is that you find out it is not deductible. The best thing is that you find out it is deductible or it sparks additional questions that could lead to something else that may help you in your own individual tax situation.
Bring your prior year return in with you so it can be looked over. Having a thought-provoking discussion and the prior year return available can go far in making sure things have been done the way that they should have been, and, if an issue is found, the best possible course of action can be discussed.
In my practice, I have found new clients coming in that did not realize the deductions and credits that they have missed in prior years’ returns. Many were surprised that some of them can still be claimed without amending a return, (for example, a missed Homestead Credit in a prior year), or via amending a return if needed for some items that can only be corrected in that manner.
Remember, if you have already filed but realize that you could have had a credit or deduction that you missed, it is not too late; you can always amend your return. If you need more information or believe you could qualify for them, I would be happy to give you a free quote on the preparation of your return.
When the right tax and financial advice is essential, talk to someone with an unmatched level of knowledge, experience, and education. A CPA understands the business of taxes and finance and can provide trusted advice and services during the tax season and throughout the calendar year.
For a free, no obligation quote, call Davette at 715-339-6638. Her office is located between the lion statues at 164 South Lake Avenue in Phillips.
THE 2023 TAX YEAR EARNED INCOME TAX CREDIT: IN SOME CASES, EVEN IF THERE ARE NO QUALIFYING CHILDREN - INCREASED CREDIT AMOUNTS FOR 2023
The Earned Income Tax Credit is a credit that is available to many taxpayers. It is based on a person’s income and the number of qualifying children that they have. However, many people do not realize that if a taxpayer’s income level falls within certain parameters, then a person whom does not have any qualifying children can qualify for the credit if all criteria are met.
The Earned Income Tax Credit is a complicated credit that has many rules and adjustments to a taxpayer’s income but it is an often used credit and provides a refund to many people, even in cases where the taxpayer has not had any federal or state withholding taken out of their pay. It is part of a group of credits which are called refundable credits, which basically means that a taxpayer can get back more than what they had withheld from their paychecks.
The maximum Earned Income Credit amounts available to taxpayers are dependent on whether or not the taxpayer has children, and, if they have children, the number of children they have.
If a taxpayer has no children, the maximum credit that they could qualify for is $600.
If a taxpayer has one child, the maximum credit that they could qualify for is $3,995.
If a taxpayer has two children, the maximum credit that they could qualify for is $6,604.
If a taxpayer has more than two children, the maximum credit that they could qualify for is $7,430.
Wisconsin has a Wisconsin Earned Income Credit which provides additional amounts based on individual taxpayer's facts and circumstances.
For a free, no obligation quote, call Davette at 715-339-6638. Her office is located between the lion statues at 164 South Lake Avenue in Phillips.
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COULD YOU BE OVER-LOOKING THE HOMESTEAD CREDIT?
Wisconsin has a credit that is known as the Homestead Credit. If you own a home or rent you may be eligible to obtain a refund even if you are not otherwise required to file a tax return.
Below is a basic summary of the qualifications for a taxpayer to be eligible for the Wisconsin Homestead Credit. If you fall into the basic summary, then it would be in your best interest to look further into the credit to ensure you qualify for it, as, if you do, it is a very rewarding credit.
The Wisconsin Homestead Credit basic qualifications are as follows:
- The property that you occupied and owned or rented, meaning your home, apartment, or other dwelling, must be subject to Wisconsin property taxes in 2023. However, there is an exception to this if the property is owned by a municipal housing authority. If the property is owned by a municipal housing authority, it would not be considered tax-exempt for the Homestead Credit if the authority makes payments to a town or city in which it is located. If you are considering the Homestead Credit, and if you live in a place that would be considered public housing, you should check with the management of the facility to see if the property would qualify for the Homestead Credit.
- You must be a legal resident of Wisconsin for the entire 2023 year.
- By December 31, 2023 you must be 18 years of age or older.
- Your household income, based on a formula used for the credit, must be less than $24,680 for 2023.
- You must meet one of the following conditions: A. During 2023, you or your spouse, if you were married, and live in the same household, must have positive earned income during the year. B. You or your spouse, if you are married, and live in the same household are disabled. C. You or your spouse, if you are married, are at least 62 years of age or older by the end of 2023.
- You cannot be claimed as a dependent for the year on someone else’s federal tax return. However, there is an exception to this if you were 62 years of age or more on December 31, 2023.
- You and your spouse, if married, will not claim the Farmland Preservation Credit for 2023 or the Veterans and Surviving Spouse’s Property Tax Credit based on your 2023 property taxes.
- At the time of filing, you cannot live in a nursing home and receive Title XIX medical assistance.
- You cannot file a claim on behalf of a person after his or her death.
- You need to fully understand the definition of household for the Homestead Credit, as only one claim can be filed per their definition of household.
- You cannot have received Wisconsin Works (W2) payments of any amount or county relief payments of $400 or more for each month of 2023.
- If you did not get benefits for a whole year, you still may be able to apply, but your property taxes and rent will need to be reduced by one-twelfth for each of the months that you received those benefits.
- The Homestead Credit is a very complicated credit which has a lot of modifications to the taxpayer’s income; however, it is also a credit that is very helpful to Wisconsin residents and one that is overlooked by many taxpayers who mistakenly think that just because they are not required to file a return, that they then should not file one. The above listed qualifications are not all inclusive; please consult with a tax adviser for other qualifications required.
For a free, no obligation quote, call Davette at 715-339-6638. Her office is located between the lion statues at 164 South Lake Avenue in Phillips.
ARE YOU GETTING ALL THE CREDITS YOU QUALIFY FOR? A SUMMARY OF MOST TAX CREDITS FOR 2023
There are a variety of credits available for the 2023 tax year. Of course, each has its own criteria and limitations. However, if you qualify for any of them, it will make quite a difference on your tax return. The following is a list of a number of the credits available and a brief summary of what they encompass.
Additional Child Credit: It is for taxpayers who do not claim the full $2,000 tax credit for each child due to circumstances on their returns and who have one or more qualifying children and over $2,500 of earned income, or have three or more children that are qualifying.
Adoption Expense: For a child who is adopted legally who is under age 18 or for the adoption of a person that is incapacitated or special needs (regardless of age). However, this credit has a phase out for Modified Adjusted Gross Income from $239,230 to $279,230.
Child and Dependent Care Credit: Expenses for care of dependent(s) who are under the age of 13 or incapacitated. This credit is provided to assist a taxpayer to work or look for work.
Child Credit: If a taxpayer has a qualifying child under the age of 17. Phase-out ranges apply due to Adjusted Gross Income levels.
Earned Income: Taxpayers with or without qualifying children who meet various income and other qualifications.
Clean Vehicle Credit: If a taxpayer purchases a new 4-wheeled plug-in electric vehicle, which is manufactured primarily for the use on public streets, roads, and highways, then the taxpayer could receive up to a $7,500 credit. This credit is subject to technical requirements and there is a phase-out range due to the taxpayer's modified adjusted gross income.
Commercial Clean Vehicle Credit: If a business purchases certain types of clean vehicles or certain types of mobile machinery, which are subject to depreciation, the taxpayer could obtain a credit in the amount of $7,500 or $40,000. The credit has various limitations.
Education, American Opportunity: For qualified higher education expenses for up to four years of qualified higher education.
Education, Lifetime Learning: For qualified post-secondary education and other courses that are to acquire or improve job skills.
Elderly or Disabled: Low income taxpayers age 65 or older or permanently and totally disabled.
Energy Efficient Home Improvement: Taxpayers who are homeowners and who decided to install certain energy saving improvements. Some examples of the improvements are insulation, windows, heat pumps, and doors. If a homeowner taxpayer has an energy audit performed, the cost of the energy audit also qualifies.
Federal Tax Paid on Fuels: Fuels which are used on a farm for farming purposes or fuels for off-highway business use and other qualified uses.
Foreign Tax: Income taxes that are paid to a foreign country or a U.S. possession on income that is subject to U.S. federal income tax.
Minimum Tax: If you are subject to Alternative Minimum Tax (AMT), this is a credit allowed against regular tax for part of the AMT paid and it is attributable to deferral items.
Mortgage Interest: A portion of interest expense paid by home buyers who have been issued a government mortgage credit certificate.
Other Dependents: A credit allowed for qualifying dependents that are not qualifying children.
Premium Assistance: This is for certain taxpayers who enroll or whose family member enrolls in a qualified health plan, which needs to be one that is offered in the Marketplace, meaning the health insurance exchange.
Previously-owned Clean Vehicle Credit: This credit is for certain used vehicles that are purchased by a taxpayer, meaning that the original use of the vehicle must have started with a person that is not the current owner of the vehicle and the vehicle must meet the requirements for the Clean Vehicle Credit that is for new vehicles. This credit is subject to ranges on modified adjusted gross income.
Residential Clean Energy: This credit is for property that is installed on a taxpayer’s residence for items such as qualified solar electric, qualified solar water heating property, qualified small wind energy, or a qualified geothermal heat pump, fuel cell, and battery storage technology.
Retirement Saver’s: This is for people who make retirement plan contributions based on income level. This credit is in the amount of 10 to 50 percent of contributions, within various phase-out ranges.
For a free, no obligation quote, call Davette at 715-339-6638. Her office is located between the lion statues at 164 South Lake Avenue in Phillips.
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