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INFLATION REDUCTION ACT

On August 16th, President Biden signed into law the Inflation Reduction Act. Highlights of the main provisions affecting taxes follow: 1. Energy credits including electric vehicles, solar panels and exterior windows 2. An extension of the special provision for Affordable Care Act healthcare subsidies where families will not pay healthcare premiums of more than 8.5% of their adjusted gross income (AGI). This cap on healthcare premiums was set to expire in 2022, but now goes through 2025. 3. Tax increases are mostly related to large corporations. There will be a 15% minimum tax on adjusted book income for large companies. In addition there will now be a 1% excise tax on stock buybacks of public companies. 4. There will be a significant increase to fund the IRS. $80 Billion of additional funding over 10 years will focus on enforcement and collection, operations support and modernizing business systems. The IRS is saying it will not increase audit rates for those making less than $400k per year.

IRS Interest Rates

The IRS interest rate for the 4th quarter of 2022 will increase to 6% for individuals who underpay or pay late. This increase is on the heels of an increase in 2nd quarter rates from 3% up to 4% and then again to 5% for the 3rd quarter. When you do not make your quarterly estimated taxes (mostly speaking to business owners), the IRS charges you interest since you are not paying your taxes evenly throughout the year. As interest rates increase, paying the quarterly estimated tax payments becomes more important.

Itemized Deductions

Taxpayers can deduct the greater of their itemized deductions or the standard deduction. The standard deduction for 2022 is $25,900 for married filers and $12,950 for single filers. Itemized deductions are primarily made up of medical expenses above 7.5% of your AGI, state and local taxes which are capped at $10k, mortgage interest, and charitable contributions. In 2017, the last year before the large increase in the standard deduction, 144 Million people itemized. In 2020, only 15 Million people itemized. Ultimately the standard deduction not only simplifies taxes, but it also gives most folks a higher deduction. Quick Fact: Hawaii has the highest life expectancy at 80.7 years and Mississippi has the lowest at 71.9 years. Broadly speaking, the highest life expectancy is in the West and Northeast, and the lowest is in the South. North Carolina is 35th at 76.1 years and South Carolina is 42nd at 74.8 years. Note that the life expectancy for the entire country was 77.0 in 2020 and 78.8 in 2019. Information is from 2020 census data. We are growing our business and always appreciate referrals. We specialize in: • Tax planning and return preparation for individuals and businesses • Accounting services, ranging from audits to bookkeeping • Please give us a call at 336-624-9524 or visit Liberty Tax at 405 E. Dixie Drive, Suite J in Asheboro.

Ryan Dodson has a Masters in Accounting from North Carolina State University. He worked in public accounting with Deloitte and Arthur Andersen. He and his wife Tiffany own and operate Liberty Tax Service.

405 East Dixie Drive•Asheboro, NC 27203 (336) 629-4700