This important tax legislation will affect tax-exempt individuals and businesses. The IRS is working on implementing the Tax Cuts and Jobs Act (TCJA). This important tax legislation will affect individuals, businesses, government entities and tax exempt entities. Presidents can recommend changes to current tax laws, and they do so often, but only Congress can make the changes.
Through this informal process, citizens act individually or collectively to influence the outcome of the formal tax legislation process by making their views known to legislators. In line with inflation adjustments, many deductions and tax credits will be gradually adjusted to account for these changes. The tax bill must be presented in the House of Representatives because the House of Representatives is supposed to represent individual citizens, rather than entire states, as is the case with the Senate. The Inflation Reduction Act extended two of these tax exemptions that are available to individuals: the credit for non-commercial energy properties and the real estate credit for refueling alternative fuel vehicles.
If the income tax system did not take into account this expected change, income taxes would often rise at a faster rate than revenues, likely to cause unexpected financial strain. Congress designed the Alternative Minimum Tax (AMT) to prevent wealthy taxpayers from using too many tax credits, deductions and other loopholes to avoid paying taxes. Many taxpayers know that Oct. 17 is the deadline to file an extended tax return, but there are other tax deadlines on this date.
With its approval, several included tax provisions will affect how Americans prepare their taxes for at least another year. 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, including a new minimum tax of 15% on accounting income, a particularly important development given their similarity in name, but not working, with separate work in the OECD to create a global minimum tax (second pillar) and address the increasing digitalization of the economy (first pillar).
The electric vehicle tax credit was also revised by the Inflation Reduction Act (including a name change to the Clean Vehicle Credit). In other words, instead of linking inflation to the traditional consumer price index, the tax reform now measures inflation using something called a chained CPI. Now, the amount of the AMT exemption is automatically adjusted for inflation, allowing many taxpayers to avoid the tax.
