Tax laws are an important part of the financial landscape, and they can have a significant impact on individuals, businesses, government entities, and tax-exempt entities. Presidents can recommend changes to current tax laws, but only Congress has the power to make them. Through an informal process, citizens can make their views known to legislators and influence the outcome of the formal tax legislation process. In line with inflation adjustments, many deductions and tax credits will be gradually adjusted to account for these changes.
The House of Representatives is responsible for presenting the tax bill because it is supposed to represent individual citizens, rather than entire states like the Senate. The Inflation Reduction Act extended two tax exemptions available to individuals: the credit for non-commercial energy properties and the real estate credit for refueling alternative fuel vehicles. The Alternative Minimum Tax (AMT) was created by Congress to prevent wealthy taxpayers from using too many tax credits, deductions, and other loopholes to avoid paying taxes. The Inflation Reduction Act also revised the electric vehicle tax credit (now called the Clean Vehicle Credit).
Income tax brackets, eligibility for certain tax deductions and credits, and the standard deduction will be adjusted to reflect inflation. Those who haven't filed their return (or haven't paid any taxes due) face severe penalties before the tax filing deadline. In August, Congress passed and the President signed into law the “Reduction of Inflation Act” which contained a series of important and complex tax changes affecting businesses and individuals. This included a new minimum tax of 15% on accounting income.
The Alternative Minimum Tax exemption amount is now automatically adjusted for inflation, allowing many taxpayers to avoid the tax. This is because instead of linking inflation to the traditional consumer price index, the tax reform now measures inflation using something called a chained CPI. It's important to stay up-to-date on changes in tax laws so you can plan accordingly. Oct.
17 is an important date for taxes as it's the deadline to file an extended return as well as other deadlines. With its approval, several included tax provisions will affect how Americans prepare their taxes for at least another year.
