There is an old saying that goes: “You can never step into the same river twice.” This is certainly true for tax seasons. Every tax season is a whole new experience, simply because tax law changes constantly, endlessly, and incessantly.
Here’s what you can expect to see this upcoming season. First, the 1040 form itself has undergone many changes. Last season, Line 1 consisted of one thing: salaries. This upcoming season, it has been expanded to no less than TEN subtitles! And that’s just one of many changes to the forms we use for individual taxpayers. Others:
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Filing status for Qualifying Widow/Widower filing has been renamed to Qualifying Surviving Spouse
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There is a new crypto question
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There is a new checkbox for the lump sum election method for multi-year social security payments
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Charitable contributions above the line are gone
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Annex 1 has five new lines
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Schedule 2 has a new checkbox to let the IRS know you are not attaching Form 5329, Additional taxes on qualified plans (including IRAs) and other tax-advantaged accounts
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All lines of pandemic legislation are gone
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Schedule 8812, Credits for qualifying children and other dependentshas mostly returned to its pre-pandemic appearance
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We have also seen a change in other ways. The W-4P form is now used only to request withholding on periodic pension or annuity payments. The form to request backup withholding on eligible non-periodic payments and rollover distributions is Form W-4R. Form W-4R will allow taxpayers to choose any withholding from 0% to 100%, instead of the default rate of 10%.
Another interesting change is the increase in the number of continuous use forms. Instead of having to get new forms each year to file a 1098, 1099-A, 1099-C, 1099-DIV, 1099-G, 1099-INT, 1099-K, 1099-MISC, 1099-NEC, and 1099-S , the IRS will issue continuing use forms that can be used for all future years.
We’re getting some new energy credits, thanks to the Inflation Reduction Act. The Energy Efficient Home Improvement Credit replaces the old $500 lifetime credit with an annual limit of $1,200, with additional restrictions based on the type of energy-efficient property installed. Credit has also been extended to second homes in the United States, rather than just primary residences. The Clean Vehicle Credit has replaced the old electric car credit. Rather than being phased out after the manufacturer sells 200,000 vehicles, this new credit requires vehicles to have final assembly in North America, as well as mineral requirements and a minimum battery capacity requirement. The suggested retail price of the vehicle cannot exceed $80,000 for vans, SUVs and trucks; $55,000 for other vehicles. This time, there are MAGI limitations on claiming the credit ($300,000 joint filers, $225,000 HOH, $150,000 all others), with no phase-out. There’s even a new credit for fuel-efficient used vehicles, with restrictions on vehicle age (at least two years), method of sale (through a dealer), and MAGI limitations ($150,000 joint filers, $112,500 HOH, $75,000 everyone else) .
Tax extenders always keep us on our toes. The mortgage insurance premium has not been extended (yet), but the primary residence indebtedness exclusion has been extended through the end of 2025.
Other items of interest include the amazing changes brought to us by the SECURE Act; drastically reducing the Form 1099-K de minimis exclusion, now to just $600; the educator deduction went from $250 to $300.
And there is always more to look forward to. We’ll be looking forward to seeing what happens with SECURE 2.0, student loan forgiveness, and potential new credit for first-time homebuyers.
Stay tuned and be sure to check out CPE’s course on individual tax updates for the upcoming season!
