Volunteer Income Tax Assistance Locations in Ventura County

The Volunteer Income Tax Assistance (VITA) program recruits volunteer tax preparers to provide free preparation of federal and state income tax returns to taxpayers with incomes less than $64,000 in 2023. VITA benefits these taxpayers by eliminating the cost of commercial tax return preparation and by securing valuable tax credits such as the Child Tax Credit and EITC.

Local VITA location sites are as follows (see this IRS link for details, including dates and times and contact information for making appointments, when required):

• Newbury Park Library, 2331 Borchard Road - Wednesdays 10am to 4pm, 2/7/24 to 4/10/24. Appointments not required.

• Conejo Creek South Park, 1350 E. Janss Road, Thousand Oaks - Mon-Fri 8:30am to 4pm, 2/1/24 to 4/12/24. Appointments not required.

• Many Mansions, 2725 East Hillcrest Drive, Thousand Oaks - 2/6/24 to 4/30/24. Appointments are required.

• Calvary Church, 5495 Via Rocas, Westlake Village - 2/6/24 to 4/9/24. Appointments are required.

• Moorpark College - 2/1/24 to 4/30/24. Appointments are required.

• East County Job and Career Center, 2900 N. Madera Road, Simi Valley - 2/7/24 to 4/30/24. Appointments are required.

• CLU Oxnard Campus: 2201 Outlet Center Drive, Suite 600 - 2/6/24 to 4/30/24 - Appointments are required.

• Oxnard College, 4000 South Rose Avenue - 2/6/24 to 4/30/24. Appointments are required.

• United Way of Ventura County, 702 County Square Drive #100, Ventura. 2/1/24 to 4/30/24. Appointments are required.

• Ventura Community Service Center, 4651 Telephone Road, 2nd Floor. Appointments are required.

What to bring:

• Proof of identification (photo ID)

• Social Security cards for you, your spouse and dependents

• An Individual Taxpayer Identification Number (ITIN) assignment letter may be substituted for you, your spouse and your dependents if you do not have a Social Security number

• Proof of foreign status, if applying for an ITIN

• Birth dates for you, your spouse and dependents on the tax return

• Wage and earning statements (Form W-2, W-2G, 1099-R,1099-Misc) from all employers

• Interest and dividend statements from banks (Forms 1099)

• Health Insurance Exemption Certificate, if received

• A copy of last year’s federal and state returns, if available

• Proof of bank account routing and account numbers for direct deposit such as a blank check

• To file taxes electronically on a married-filing-joint tax return, both spouses must be present to sign the required forms

• Total paid for daycare provider and the daycare provider's tax identifying number such as their Social Security number or business Employer Identification Number

• Forms 1095-A, B and C, Health Coverage Statements

• Copies of income transcripts from IRS and state, if applicable

www.irs.gov/individuals/checklist-for-free-tax-return-preparation

The IRS partners with software companies to provide “IRS Free File” guided tax software for taxpayers with adjusted gross income (AGI) or $79,000 or less for the 2023 tax year. Learn more at apps.irs.gov/app/freeFile. Providers for 2023 filings include FreeTaxUSA, 1040.com, FileYourTaxes.com, 1040NOW, TaxAct, OLT.com, TaxSlayer, and ezTaxReturn.com

All About the Previously Owned Clean Vehicle Credit

A brand new tax credit, the Previously Owned Clean Vehicle Credit, came about from the Inflation Reduction Act of 2022. This new credit applies to pre-owned all-electric, plug-in hybrid and fuel cell electric vehicles purchased on or after January 1, 2023 through 2032. The credit, which is non-refundable, is 30% of the sales price, up to a maximum credit of $4,000.

As with pretty much every tax law, lawmakers made sure to make the requirements for this credit as confusing as possible. Here are the main parameters:

• The sales price, exclusive of taxes ad fees, much be $25,000 or less.

• The model year of the car must be at least two years prior to the calendar year the car is purchased.

• The car must be purchased from a licensed dealer, not a private party.

• The buyer’s modified adjusted gross income (AGI) cannot exceed $150,000 for married filing jointly taxpayers, $112,500 for head of household filing status and $75,000 for other taxpayers, in either the year of purchase or the previous year.

• The buyer cannot be claimed as a dependent by someone else.

• You can’t claim the credit more than once every three years, based on the actual purchase date of the car.

• The credit is applicable per taxpayer; the IRS as of this writing has not clarified if both spouses could claim the credit within the same three-year period. (That said, in theory they could file separately in the years they claim the credit.)

There are other specifics listed at www.fueleconomy.gov/feg/taxused.shtml#requirements.

Another important detail is that vehicles are only eligible for the credit for the first qualifying sale taking place on or after August 16, 2022. In other words, a used clean vehicle is not eligible for the credit after the first time, after 8/16/22, it is re-sold for $25,000 or less. How in the world will we know if that’s the case? Ask the dealer. They will know. What this means is that two cars with the same make, model and features offered at the same price of $25,000 or less…one them could be eligible for the credit while the other one is not.

As mentioned above, this is a non-refundable credit. This means that if you take the credit on your tax return, but your federal taxes are less than the credit, the excess goes away.

But wait…there’s a solution for that beginning in 2024! Starting this year, the credit can be transferred to the dealer and applied towards the sales price. The dealer, in turn, will receive the full credit from the IRS. The only catch is that you have to meet the AGI requirements mentioned above. If you file your tax return and do not meet those requirements, you’ll have to pay back the credit with your return. Whether you claim the credit at the dealer or on your return, you have to report the purchase on Form 8936.

Let’s use an example:

George is single and decides he wants to purchase a used EV. George expects his income to be $90,000 in 2024, but his 2023 return showed $70,000 in AGI, which qualifies him for the credit in 2024. He goes to the CarMax website and searches for electric cars at a price of $25,000 or less that are shown at www.fueleconomy.gov/feg/taxused.shtml.

George finds a 2013 Chevy Bolt for $13,000 but it shows it has had two owners. If it was already re-sold by a dealer to the 2nd owner after 8/16/22 for $25,000 or less, it is not eligible for the credit. The dealer will be able to tell you if this is the case. But let’s assume the previous sale took place before that date. George purchases the car for $13,000 plus sales taxes, license fees, etc., less the credit, because he chooses to transfer the credit to the dealer. The credit is 30% times $13,000, or $3,900. Enjoy your used Chevy Bolt, George! (Let’s hope the car’s battery still holds a decent charge.)

Looking for information on NEW clean vehicle car tax credits? Visit www.fueleconomy.gov/feg/tax2023.shtml.

What is Head of Household Filing Status and Who Qualifies for It?

My hair stylist brought up the fact that her elderly mother is going to move in with her and was wondering if that will benefit her taxwise. I told her she may be eligible to use the “Head of Household” filing status on her tax return, which could save her in taxes.

Filing Status Overview

The IRS has four tax filing statuses - Married Filing Jointly, Married Filing Separately, Single, Head of Household and Qualifying Surviving Spouse (before 2022, this was referred to as Qualifying Widow(er)). More than one filing status can apply to you; it is up to you to choose the one that will give you the lowest taxes.

Head of Household Status

Head of Household (HOH) filing status is available to taxpayers that are unmarried and that provide more than half the cost of a home for “certain other persons.”

It is preferable to use Head of Household filing status because the lower tax brackets are slightly more beneficial than for Single filing status, as follows for 2023:

• 10% Tax Rate: $0 to $11,000 for Single vs $0 to $15,700 for HOH

• 12% Tax Rate: $11,001 to $44,725 for Single vs $15,701 to $59,850 for HOH

• 22% Tax Rate: $44,726 to $95,375 for Single vs $59,851 to $95,350 for HOH

• 24% Tax Rate: $95,376 to $182,100 for Single vs $95,351 to $182,100 for HOH (practically the same)

• 32% Tax Rate: $182,101 to $231,250 for Single vs $182,101 to $231,250 for HOH (exactly the same)

Additionally, the standard deduction is an amount on your tax return that reduces your taxable income and is used by the majority of taxpayers who do not itemize deductions (which we will not go into here). The standard deduction for HOH is $20,800 in 2023 vs $13,850 for Single. This is another significant benefit of filing HOH.

Head of Household Qualifying Factor #1 - Unmarried

Seems simple, right? Unmarried is unmarried, i.e.. single. But you can actually be married but be considered unmarried for HOH purposes. Here’s what the IRS considers as “unmarried” for purposes of HOH status:

• You file a separate tax return from your spouse.

• You paid more than half the cost of keeping up your home during the tax year.

• Your spouse didn’t live in your home during the last 6 months of the year, exclusive of temporary absences for business, medical care, school, or military service.

• Your home was the main home of your child, stepchild or foster child for over half the year.

• You must be able to claim the child as a dependent (with some exceptions we won’t go into detail on here).

Qualifying Child for Head of Household Status

For a child to qualify you for HOH status,

• The child must be younger than the taxpayer and either under age 19, under age 24 an a full-time student or any age and permanently and totally disabled and

• Lived with taxpayer over half the year and

• Did not provide over half of their own support and

• Is one of the following: son, daughter, stepchild, foster child, brother, sister, stepbrother/sister, half brother/sister or descendant of any of them.

So, your 23 year old stepsister who is a full time student can qualify you for HOH status if she lives with you over half the year and you provide over half of her support.

While the taxpayer claiming HOH status must be considered unmarried, the qualifying child does not have to be unmarried. The qualifying child can be married, but if you can claim him/her as a dependent, they still qualify, assuming they meet the citizen test and joint return test (which we won’t go into detail here).

Confused yet? You’re not alone.

Qualifying Relative for Head of Household Status is a Parent

Your mother or father can qualify you for HOH status if you can claim him or her as a dependent.

So what does that mean for a parent to qualify as your dependent? They have to meet the following tests:

• They can’t be claimed as a dependent on someone else’s return.

• Generally they can’t file a joint tax return with someone else, unless they are only filing to get a refund and have no tax liability.

• They are a U.S. citizen, U.S. national, U.S. resident alien or a resident of Canada or Mexico.

• Taxpayer must have paid over half of the cost of keeping up a home for the parent during the year. That includes costs such as rent, mortgage interest, real estate taxes, homeowner’s insurance, repairs and maintenance of the home, utilities, food eaten in the home and other household expenses. It does not include personal expenses such as clothing, health insurance, transportation costs, etc.

• The parent’s gross income must be less than $4,700 in 2023 ($4,400 in 2022 - this amount changes every year). How is gross income determined? Gross income is all income that is not exempt from tax, such as wages, interest, taxable unemployment, taxable social security benefits, etc.

Additionally, for purposes of determining HOH status, a parent does not have to live with the taxpayer, as long as the parent meets the various dependency tests listed above.

So let’s stand back a second. If you are unmarried and are supporting over half the cost of your parent and they either live with you or elsewhere, and their only income is Social Security, chances are you can file your taxes using Head of Household status.

Qualifying Relative for Head of Household Status Other Than a Parent

To claim a relative other than a child or a parent for HOH status, the additional requirements are:

• Must be a brother, sister, half brother, half sister, step brother, step sister, niece, nephew, stepbrother or any other person, as long as it does not violate local law.

  • Individuals that are not related to you in any of the ways above cannot qualify you for HOH status, though they can stay possibly qualify as a dependent.

• Must have lived with you over half the year.

To Learn More About Filing Status

The IRS publishes Publication 501, “Dependents, Standard Deduction and Filing Information” for those looking for more detailed information on these topics. For the short version, read the Form 1040 instructions.

Should I Start Collecting Social Security Benefits Before Reaching Full Retirement Age?

Full Retirement Age (FRA) was 65 for many years. Congress passed a law in 1983 to gradually increase FRA to reflect increasing lifespans. FRA currently ranges from 65 for those born before 1943 to 67 for those born in 1960 or later. At what point should you start taking Social Security payments?

You can also start receiving Social Security benefits as early as age 62, but your monthly benefit would be reduced anywhere from 25 to 30% as a result. See www.ssa.gov/benefits/retirement/planner/agereduction.html for more information on how much you would receive, based on your year of birth.

You can also delay receiving Social Security beyond your FRA, up until age 70. The benefit to doing this is that your benefits are increased anywhere between 5.5% to 8% per year. See www.ssa.gov/benefits/retirement/planner/delayret.html for more information.

Let’s look at a simple example:

Conejo Joe was born in 1960 and thus turned 62 in 2022. His FRA is 67. His full retirement benefit is, say, $1,000 per month. If he chooses to start receiving payments at age 62, they would be reduced by 30%, to $700 per month. If he chooses to delay receiving benefits until age 70, they would increase by 8% per year over 3 years, to $1240 per month (ignoring increases for inflation).

If Conejo Joe started receiving $700 per month at age 62, by the time he reaches age 70 he would have received $58,800 (ignoring inflation increases). If he waited until age 70, he would receive $1240 per month, or $540 per month more than starting benefits at age 62. It would take him about 9 years to make up the gap.

But if Conejo Joe had other income or continued working at age 62, up to 85% of those $700 per month Social Security payments could be taxed at the federal level (most states, including California, do not tax Social Security benefits). Those taxes should be factored into the decision as to whether he should delay receiving benefits.

If Conejo Joe started taking Social Security at age 67, he would receive $1,000 per month. So by the time he reaches age 70, he would have received total payments of $36,000 (again, ignoring inflation). Had he waited until age 70, he would receive $1240 per month, or $240 more than the FRA benefits he received for the last three years. It would take him 12 1/2 years to make up the $36,000 gap. So if he anticipates living until at least age 82 1/2, in theory it makes sense to wait until age 70 to collect benefits, if possible.

Everyone’s situation is different. Some folks really need the payments early. Others can wait because they are still working. Visit www.ssa.gov for more information and talk to your financial planner and/or CPA for guidance.

One final point. The Social Security Administration says “If you decide to delay your benefits until after age 65, you should still apply for Medicare benefits within three months of your 65th birthday. If you wait longer, your Medicare medical insurance (Part B) and prescription drug coverage (Part D) may cost you more money.

IRS Extends 2022 Tax Return Filing Deadline to October 16, 2023 in Most California Counties

Last week, the IRS extended the 2022 tax filing deadline for taxpayers in most California counties (including our local LA/Ventura/Santa Barbara/Orange counties) to October 16, 2023. The deadline was previously extended from April 18th to May 15th due to the January storms.

In addition to individual and business tax returns, this extension applies to funding IRAs and to making estimated tax payments for Q422 to Q323 (if applicable).

The state of California has conformed to extension of filings and payments to October 16th. See www.ftb.ca.gov/about-ftb/newsroom/news-releases/2023-03-ftb-california-winter-storm-tax-relief-extension.html for details.

All About the New Energy Efficient Home Improvement Credit for Tax Years Beginning in 2023

Prior to 2022, the federal “Nonbusiness Energy Credit” allowed for a lifetime tax credit of a maximum of $500 for installation of certain energy-efficient exterior doors, windows, skylights, certain roofs and insulation. It also could be used for the purchase of certain central air conditioners, electric heat pumps, gas water heaters and certain other appliances.

The property must be installed in your personal residence and the credit was based on 10% of the cost of the purchases. There were additional credit limits of $200 for exterior windows and skylights, $300 for heat pumps, central AC and water heaters, $150 for furnaces and boilers and $50 for qualified main air-circulating fans. This credit was extended through 2022 and is claimed on Form 5695, filed with your federal tax return.

The Inflation Reduction Act of 2022 brought dramatic changes to this tax credit and renamed it the Energy Efficient Home Improvement Credit (let’s call it EEHIC). Instead of a $500 lifetime cap, there’s a $1200 ANNUAL cap, and the credit is based on 30% of the purchase price, increased from 10%. Additionally, there is a separate $2,000 per year cap allowed for qualified heat pumps and heat pump water heaters, biomass stoves and boilers.

EEHIC covers two main categories of purchases - Energy Efficient Home Improvements and Residential Energy Property.

Energy Efficient Home Improvements include insulation materials, exterior windows, including skylights, and exterior doors that meet certain Energy Star requirements.

Residential Energy Property covered by EEHIC must meet or exceed certain high-efficiency standards and includes the following:

• Electric or natural gas heat pumps and heat pump water heaters

• Central air conditioners

• Natural gas, propane or oil water heaters, furnaces and hot water heaters

• Biomass stoves or boilers, oil furnaces and hot water boilers

• Improvements to or replacements of panelboards, sub-panelboards, branch circuits or feeders with a load capacity of 200 amps or more

What efficiency standards must be met? Here are some examples:

• Natural gas water heaters: ENERGY STAR certified models > 0.81 UEF (Uniform Energy Factor) for tanks less than 55 gallons and > 0.86 UEF for tanks greater than or equal to 55 gallons.

• Tankless gas water heaters: ENERGY STAR models with > 0.95 UEF are eligible. 

• Exterior windows and skylights: Must meet ENERGY STAR “Most Efficient” criteria. See www.energystar.gov/products/most_efficient

Home Energy Audits are another new category included in the EEHIC. This is an inspection and written report by a certified auditor that identifies energy efficiency improvements, including an estimate of energy and cost savings.

In addition to the annual $1200 and $2000 tax credit caps mentioned above, there are additional annual caps as follows:

• $250 cap on each exterior door, up to a total of $500 per year

• $600 annual cap on exterior windows and skylights

• $150 annual cap on home energy audits

• $600 annual cap on each Residential Energy Property item

How is the cost determined? Does it include installation? The cost of Energy Efficient Home Improvements (e.g. insulation, windows, doors) DO NOT include labor. Residential Energy Property (e.g. water heaters, central air, heat pumps), DO include the cost of labor. See IRS FAQs at THIS LINK posted 12/22/22 for more details.

How long is EEHIC in place? From 2023 through 2032 (at the current time).

Does EEHIC apply only to my primary residence? Yes for Energy Efficient Home Improvements (again - insulation, windows and doors). For Residential Energy Property, it can be in any U.S. home owned by the taxpayer.

Is the EEHIC carried to future years if I can’t use it? No. If your taxes are lower than the credit, lucky you! But no, any unused credit is not carried forward to future year tax returns.

How do you claim the EEHIC? Form 5695, filed with your federal tax return. Starting in the 2024 tax return, taxpayers will need to provide the qualified product identification number for any items purchased

Confused? Yes, so am I. But with this summary, your own research, dealers/retailers and your CPA, you’ll get this nailed down and take advantage of these new tax credits.

For a nine page IRS Fact Sheet about the Energy Efficient Home Improvement Credit as well as the Residential Clean Energy Property Credit (e.g. solar credit, which is back to 30% from 2022 through 2032, then 26% in 2033 and 22% in 2034), visit www.irs.gov/pub/taxpros/fs-2022-40.pdf.

Learn more about Energy Star qualified products at www.energystar.gov/about/federal_tax_credits/non_business_energy_property_tax_credits.

One example of how to maximize the credit. Let’s say you’d like to replace 20 exterior windows on your home. The windows cost $400 apiece, excluding labor. If you install them all in one year, the cost would be $8,000 plus installation. $8,000 times 30% equals $2400, but your EEHIC is limited to $600, for a net cost of $7,400 plus installation. If you want to maximize the credit, you could buy 5 windows a year for 4 years at a cost of $2,000 per year, plus installation (ignoring inflation). By stretching the purchase over 4 years, you increase the tax credit from $600 to $2,400, for a net cost of $5,400 plus installation. Something to think about.

My Practical Experience

So I went to Home Depot to look for windows and water heaters that are qualified for EEHIC. I found a couple water heaters that met the requirements but the windows I had no clue which one did. So I thought, maybe I could figure it out by going back to the IRS Q&As at THIS LINK, which had a link to the ENERGY STAR website. So I entered my local zip code, which took me to a list of tax credits by product type at THIS PAGE. So I clicked Windows & Skylights Tax Credit at THIS PAGE. Then I clicked “Find Eligible Products” at THIS PAGE. Under Building Products I found the Windows, Door & Skylights category, which had a link to a “NFRC Directory” at THIS PAGE, where there are links to searches by region for the National Fenestration Rating Council. There’s no definition of what is in each region. So I guessed the Southern region, which I searched by product type, like Single and Double Hung Windows. From there, I saw a list of “Energy Star Partner” names. I picked Milgard, which then gave me a list of Milgard product lines that I’m going to assume meet the ENERGY STAR “most efficient” requirement (though it doesn’t clearly state that anywhere). So where do I buy these theoretically qualifying products? The site didn’t tell me. Bottom line: You’re probably going to have to just ask the retailer which products meet the IRS requirements as the IRS has not made this process easy.

All About the New "Clean Vehicle Credit" and "Previously Owned Clean Vehicle Credit" Applicable to Tax Years 2023 through 2032

The Inflation Reduction Act of 2022 brought major changes to incentivize people to purchase electronic vehicles (EVs), plug-in hybrids and hydrogen fuel cell powered vehicles. The credit is now called the “Clean Vehicle Credit.” Here we will highlight aspects of the new laws for clean vehicle purchases in 2023 through 2032.

In the past, the major constraint on these credits has been a 200,000 car phase-out on the credits, which was blown through awhile back for several vehicles. This constraint is now gone.

However here are new requirements for taxpayers to receive clean vehicle credits of $7,500 per vehicle beginning in 2023. These new requirements include final assembly, MSRP and income limitations, and are highlighted below.

FINAL ASSEMBLY REQUIREMENTS

Final assembly of the vehicle must take place in North America. How do you find this out? View the list at https://afdc.energy.gov/laws/electric-vehicles-for-tax-credit and look up the Vehicle Identification Number (VIN) to see if the auto meets the requirements. In future years there will also be specific requirements regarding components of the battery. Your dealer should be able to quickly give you an answer on this.

MSRP REQUIREMENTS

There are manufacturer’s suggested retail price (MSRP) limitations for vehicles to be eligible for the new credits. MSRP includes options, accessories and trim, but not destination charges. The maximum MSRP allowed is $55,000 for passenger vehicles and $80,000 for vans, pick-up trucks and SUVs. What that means is that if the MSRP is greater than those amounts, even by $1, they will not be eligible for any Clean Vehicle Credit. Let’s take a look at some MSRPs as of January 2023 for selected 2023 EVs:

• Audi Q5 55 PHEV MSRP SUV starts at $57,400

• BMW 330e MSRP starts at $44,900

• BMW X5 PHEV SUV MSRP starts at $65,700

• Cadillac LYRIQ SUV MSRP starts at $62,990

• Chevy Bolt MSRP starts at $25,600

• Chevy Bolt EUV SUV MSRP starts at $27,200

• Chrysler Pacifica PHEV MSRP starts at $49,995

• Ford Escape Plug-In Hybrid (SUV) starts at $38,500

• Ford E-Transit Van MSRP starts at $49,575

• Ford F-150 Lightning truck EV MSRP starts at under $40,000

• Ford Mustang Mach-E (SUV) MSRP starts at $46,895

• GMC Hummer EV Pickup MSRP starts at $110,295 (ineligible)

• GMC Hummer EV SUV MSRP starts at $105,595 (ineligible)

• Jeep Grand Cherokee 4xe SUV MSRP starts at $60,260

• Jeep Wrangler 4xe SUV MSRP starts at $54,735

• Lincoln Aviator Plug-In Hybrid SUV starts at $53,340

• Lincoln Aviator Grand Touring SUV starts at $69,190

• Lucid Air MSRP starts at $89,050 (ineligible)

• Mercedes EQS SUV MSRP starts at $104,400 (ineligible)

• Tesla Model 3 MSRP starts at $46,990

• Tesla Model S MSRP starts at $96,820 (ineligible)

• Tesla Model X MSRP starts at $119,200 (ineligible)

• Tesla Model Y SUV MSRP starts at $65,990

• Nissan Leaf MSRP starts at $28,040

• Rivian R1S SUV MSRP starts at $72,500

• Rivian R1T Pickup MSRP starts at $67,500

• VW ID.4 SUV MSRP starts at $37,495

These MSRPs are not adjusted for inflation, which means that over the course of time, it is likely that, unless prices drop, less of these vehicles will be eligible for the credit.

INCOME AND OTHER LIMITATIONS

There are now income limitations to obtain the credit. Your “Modified Adjusted Gross Income” (MAGI*) must be $300,000 or less if you use the Married Filing Jointly filing status, $225,000 or less for Head of Household and $150,000 or less for other filing statuses in either the current or prior year to qualify for the credit. MAGI limits are not adjusted for inflation, which means that over time, less people will be eligible for the credits.

(*What is MAGI? For purposes of this credit, MAGI is basically all your taxable income, less various adjustments like IRA contributions, plus any untaxed foreign income. Ask your tax advisor for more specifics.)

The credit is non-refundable and any unused credit does not carryforward to future years. What this means is that if your taxes are less than $7,500 and your credit is $7,500, you will not receive the full amount of the credit.

You claim the credits on Form 8936 (Qualified Plug-In Electric Drive Motor Vehicle Credit) with your tax return.

Starting in 2024, you can apply the Clean Vehicle Credit towards the purchase of the vehicle at the dealership rather than wait and apply for the credit on your tax return. Yay! However, there could be some complications in doing this - what if your MAGI is too high? Will you have to pay the credit back on your return? These things will have to be sorted out.

USED CLEAN VEHICLE CREDITS - SOMETHING NEW

There are now tax credits available for certain used clean vehicles. It is aptly called the Previously Owned Clean Vehicle Credit (POCVC). If you purchase a used "clean vehicle” from an authorized dealer and the sales price is $25,000 or less, you may be able to take a tax credit of 30% of the sales price, up to a maximum credit of $4,000.

The MAGI limits to claim the used car credit are exactly half of the new car credits - $150,000 or less for joint filers, $112,500 for head of household and $75,000 for other filing statuses. So, if you are single and make $75,001 in 2022 and 2023, you will not be able to claim the POCVC for a 2023 purchase.

Tax planning (an example): Let’s say your W-2 wages are $76,000 this year and last year but you want to buy a $25,000 used clean vehicle and obtain a $4,000 POCVC on your 2023 tax return. Consider contributing to your employer’s 401k plan in 2023 enough to reduce your taxable W-2 income to $75,000. Or if your employer does not have a 401k, contribute $1,000 to an IRA to reduce your MAGI down to $75,000. (This is just one simple example; your tax advisor can help you with your particular situation.)

The POCVC, like the Clean Vehicle Credit, is not refundable and cannot be carried forward to future years.

Learn more on the IRS website at www.irs.gov/credits-deductions/credits-for-new-clean-vehicles-purchased-in-2023-or-after.

The state of California has its own array of rebates that can vary from $1,000 to $7,000 currently, increasing to $7,500 starting February 28, 2023. Learn more on the California Clean Vehicle Rebate Project website at cleanvehiclerebate.org/en. Best to apply the California rebates at the time of purchase of the vehicle….otherwise they are considered taxable on your federal returns.

(As with other tax matters, ask your tax advisor for details. The information herein is current as of January 2023.)