Tax Tips
Tax law changes in two ways: through legislation, which is loud and infrequent, and through annual inflation adjustments, which are quiet and constant. Most of what affects a typical return is the second kind.
Every dollar figure below is indexed and republished by the IRS each autumn for the following year. Check the current revenue procedure, or ask us, before you plan around a specific number.
Brackets and the standard deduction
Bracket thresholds and the standard deduction are adjusted for inflation every year. In years with high inflation the adjustment is large enough to matter: the same nominal income can fall into a lower bracket than it did the year before. It also means the itemize-or-not decision is worth re-running annually rather than assuming last year’s answer holds.
Retirement contribution limits
Elective deferral limits for 401(k)-type plans, IRA contribution limits, catch-up amounts for savers over 50 and the income ranges that phase out Roth eligibility all move each year. If you set your payroll deferral once and never revisited it, you are almost certainly leaving room unused.
Reporting thresholds
Thresholds for third-party payment reporting on Form 1099-K have shifted repeatedly and have been delayed more than once. The practical point has not changed: receiving a 1099-K does not make a payment taxable, and not receiving one does not make it tax-free. Report what you earned and keep the records that show which deposits were sales and which were reimbursements from friends.
Energy and vehicle credits
Credits for home energy improvements and clean vehicles carry conditions that have changed year to year — assembly and sourcing requirements, income caps, price caps, and whether the credit can be transferred to the dealer at the point of sale. Confirm eligibility before the purchase. After the fact there is nothing to fix.
Business provisions to watch
- Bonus depreciation has been stepping down from 100 percent, which changes the arithmetic on large equipment purchases.
- Research expenditures must be capitalised and amortised rather than expensed immediately, which has raised taxable income for firms that develop software or products.
- Beneficial ownership reporting obligations for small entities have been litigated and revised; if you own an LLC or corporation, confirm your current filing status.
What actually to do
Two things. Re-run your withholding or estimates against this year’s figures rather than last year’s, and check eligibility before any purchase you are making partly for a credit. Those two habits catch most of what the annual changes would otherwise cost you.
Want this reviewed against your own return?
Bring last year’s return to a consultation and we will tell you, plainly, whether anything on this page applies to you.
