Fiscal Fitness

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Appears in the January 2023 issue.

Tax considerations to keep in mind for the coming year

Illustration by Kevin Sterjo

A new calendar year is the perfect time to get your financial house in order by planning ahead for any tax changes coming in 2023. Having seen their share of oversights, miscues, and flat-out gaffes over the years, tax accountants Jack Carney and C. Andrew Miriani of Naperville CPA firm Lauterbach & Amen have a few suggestions.

• Despite last year’s wild market gyrations, plenty of investors are still carrying cryptocurrencies in their portfolios heading into 2023. And if some of those negative swings persist into the year ahead, Mariani says it’s important to know that crypto is treated the same as capital income—which means investors can deduct up to $3,000 in losses. “Many people remain pretty active in this space, so this is an area where they should keep an eye on the potential to deduct losses next year,” he says.

• As the proliferation of gambling and sports betting continues seemingly unabated heading into 2023, Carney says Illinois filers should remember that the state includes gambling winnings as taxable income and does not allow filers to claim gambling losses. “Some people got hit really hard on state taxes because they didn’t understand the Illinois rule,” he says. “You also have to have enough to itemize to claim these on the federal return as well.”

• The tax credit for electric vehicles in the Inflation Reduction Act (IRA) is changing in 2023. For EVs placed into service after December 31, 2022, the IRA extends the up-to-$7,500 EV tax credit for 10 years—until December 2032 (the exact amount of the credit is determined by a calculation based on the vehicle’s sourcing and assembly, among other factors). Additionally, used EVs (at least two years old) now have a separate tax credit of either up to $4,000 or 30 percent of the price of the vehicle, whichever is less. The EV tax credit is subject to income limits, however. Single filers with modified adjusted gross income greater than $150,000 don’t qualify, nor do married couples filing jointly making more than $300,000 and head-of-household filers earning $225,000 or more.

January Checkup

This is an ideal time to strategize for the new year—and help alleviate any last-minute coulda-woulda-shoulda issues down the road.

“The biggest problem we have from a planning perspective is finding things out after the fact,” Carney explains. “We always stress that people should talk to us during the year so we can go through options and have a plan, because once we get into filing, we can’t go back and fix something that happened the previous year.”

 

Illustration by Kevin Sterjo