(303) 499-7445 info@tandemcpas.com

Year-end Reminders

Tax Credits and Household Employees

  1. Federal Child Tax Credit – The child tax credit remained at $2,000 per child in 2023.
  1. Dependent Care Tax Credit – The child and dependent care credit remained the same in 2023.
  • Allowable expenses are $3,000 per child /$6,000 per family.
  • Percent of expenses used as a credit is 20% to 35%, depending on income.
  • Expenses must be paid by 12/31/23.
  1. Inflation Reduction Act of 2022 Most of the changes became effective 1/1/23 and include:
  • Electric vehicles (clean vehicle credit)
    • New vehicles – The maximum amount of the federal nonrefundable tax credit remains at $7,500, but there are many requirements to get the full federal tax credit.  Requirements entail the following:
    • Used vehicles – A credit up to $4,000 for buying a used (at least 2 years old) electric car from a dealership is available as of 1/1/23. Modified adjusted income limits apply ($75k single, $112,500 Head of Household, and $150k married filing jointly).  Other restrictions apply – see link below for more info: https://www.irs.gov/credits-deductions/used-clean-vehicle-credit
    • EV charger credit is extended to 12/31/32 – 30% of cost up to $1,000 and are intended for residents in non-urban or low-income communities.
    • Colorado innovative motor vehicle credit – Effective 7/1/23 the CO tax credits increased to $5k for the purchase or lease of a qualifying vehicle.  The credit amounts for the innovative truck credit was lowered for 2023 but is set to increase for 2024. The updated credit amounts for can be found using this link:  https://tax.colorado.gov/imv-itc-july-1-2023-changes
  • Energy Efficient Home Improvement Credit
    • The lifetime limit on home energy improvements (like qualifying windows, doors, insulation, HVAC) has been changed to yearly maximum with no limit on the number of years to claim.  Maximum annual limit is $3,200 in the following two categories:
      • Qualified energy efficient residential property improvements – 30% of costs of following three categories with an annual limit of $1,200 for all three sub-categories combined:
        • Qualified Energy efficiency improvements – installation cost not included
          • Insulation
          • Exterior windows (including skylights) – Maximum annual credit for windows & skylights is $600.
          • Exterior doors – $250 for any exterior door ($500 aggregate limit for all exterior doors)
        • Residential energy property costs – $600 maximum annual credit for each category (labor for installation costs included):
          • Electric panels
          • Efficient central air conditioners
          • Natural gas, propane, or oil water heaters
          • Natural gas, propane, or oil furnace or hot water boiler
        • Home energy audits – Maximum credit is $150 – by certified home energy auditor
      • Qualifying heat pumps, heat pump water heaters, and biomass stoves & boilers – 30% of cost limited to $2,000 annually.
        • Qualified electric or natural gas heat pumps and heat pump water heaters which meet or exceed the highest efficiency tier
        • Biomass stoves or boilers with a thermal efficiency rating of at least 75%.
    • More information on qualification requirements can be found here:
  • Residential Clean Energy Credit – The amount of credit for qualifying property was scheduled to be 26% in 2022 and 22% in 2023. It has now been increased to 30% from 2023 through 2032.  Qualifying property includes the following:
  • Household Help – If you have hired an individual (as opposed to a company) to work at your home (such as for child care, yard work, or cleaning), you are normally required to issue them a W-2 in January 2024 if you paid them $2,600 or more in 2023 ($2,700 in 2024).
    • Workers who are your employees: You have a household employee if you hired someone to do household work and that worker is your employee. The worker is your employee if you can control not only what work is done, but how it is done. If the worker is your employee, it doesn’t matter whether the work is full time or part time or that you hired the worker through an agency or from a list provided by an agency or association. It also doesn’t matter whether you pay the worker on an hourly, daily, or weekly basis, or by the job.
    • Workers who aren’t your employees: If only the worker can control how the work is done, the worker isn’t your employee but is self-employed. A self-employed worker usually provides his or her own tools and offers services to the general public in an independent business. A worker who performs child care services for you in his or her home generally isn’t your employee.  If an agency provides the worker and controls what work is done and how it is done, the worker isn’t your employee.
    • Example: You made an agreement with John Peters to care for your lawn. John runs a lawn care business and offers his services to the general public. He provides his own tools and supplies, and he hires and pays any helpers he needs. Neither John nor his helpers are your household employees
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(303) 499-7445

info@tandemcpas.com

287 Century Circle, Suite 200, Louisville, CO 80027

Tandem CPAs LLC  (Colorado firm license #FRM.5000548).

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