Judy L. Arfa CPA, PLLC

Judy L. Arfa CPA, PLLC Judy Arfa CPA has been offering tax advising and preparation services to individuals, nonprofits, an

The new clean vehicle credit is for a vehicle that is placed in service on or after January 1, 2023. In addition, to qua...
12/31/2022

The new clean vehicle credit is for a vehicle that is placed in service on or after January 1, 2023. In addition, to qualify for the credit, the vehicle:

1. Cannot be acquired for resale purposes.
2. Must meet the definition of a motor vehicle under Title II of the Clean Air Act (that is, any vehicle manufactured primarily for use on public streets, roads, and highways. It must also have at least four wheels).
3. Must have a gross vehicle weight rating of less than 14,000 pounds.
4. Must be powered to a significant extent by an electric motor with a battery capacity of 7 kilowatt hours or more and must be capable of being recharged from an external source of electricity.
5. Must have final assembly in North America.

NOTE: The credit may be limited based on the taxpayer's income for 2023. Maximum credit is $7,500.

Many workers have bigger balances than usual in their workplace healthcare flexible-spending accounts, which allow emplo...
12/27/2022

Many workers have bigger balances than usual in their workplace healthcare flexible-spending accounts, which allow employees to set aside pretax money from their paychecks to pay for medical expenses.

Now they are facing a Dec. 31 deadline to use their money or forfeit it. Check your FSA balance and your plan’s spend down rules now.

Make your required withdrawals by December 31, 2022.In most cases, taxpayers 72 and older must take annual required mini...
12/25/2022

Make your required withdrawals by December 31, 2022.

In most cases, taxpayers 72 and older must take annual required minimum distributions, or RMDs, from traditional individual retirement accounts and 401(k)s by Dec. 31 or face a penalty of 50% of the amount they should have withdrawn.

One exception: Those who turned 72 this year can wait until April 1, 2023 to take their first RMD.

New I bonds sold by the Treasury from November 2021 through April 2022 earn interest at a rate of 7.12%. Go to tresurydi...
02/19/2022

New I bonds sold by the Treasury from November 2021 through April 2022 earn interest at a rate of 7.12%. Go to tresurydirect.gov.

The minimum holding period is only one year. The bonds earn interest for 30 years, or until you decide to redeem them, whichever comes first. If you redeem them before five years, you lose interest for the previous three months. After five years, you can cash in the bonds without a penalty.

Most Medicare beneficiaries in 2022 will pay $170.10 a month for Medicare Part B if their income for 2020 did not exceed...
02/13/2022

Most Medicare beneficiaries in 2022 will pay $170.10 a month for Medicare Part B if their income for 2020 did not exceed $91,000 as an individual or $182,000 as a couple filing jointly.

If you had a substantial increase in income for 2020, your Medicare premiums will increase for 2022.

Here are some events that could cause an increase in premiums for 2022. During 2020, did you?

1. Sell your house or a rental property and end up with a sizable capital gain?

2. Withdraw a large sum from your traditional IRA? Withdrawing from a ROTH would not increase your taxable income in most circumstances.

3. Earn a six-figure salary?

4. Convert a large chunk of your traditional IRA to a Roth?

Dec. 31 is the last day for individuals to make tax-deductible charitable donations for 2021.Here are some things to con...
12/12/2021

Dec. 31 is the last day for individuals to make tax-deductible charitable donations for 2021.

Here are some things to consider:

1. Nonitemizers can deduct up to $300 per single filer and $600 per married couple filing jointly. Only cash contributions will qualify.

2. Owners of appreciated, publicly traded shares held for longer than a year can donate the shares to a charity, avoid capital-gains tax on the appreciation, and deduct the fair market value as a charitable donation.

3. A qualified charitable distribution (QCD) permits owners of traditional IRAs who are 70½ or older to donate account assets totaling up to $100,000 a year directly to one or more charities. There is no deduction for the donation. However, the withdrawal is not reported as income on your tax return. This may result in lower income taxes and lower Medicare premiums which are based on income. Nonitemizers can take advantage of this opportunity. Contributions to donor advised funds are not allowed.

4. Bunching of charitable donations may result in being able to itemize deductions every other year. If you donate $30,000 one year and nothing the next, you will have a total of $30,000 in Schedule A deductions every second year. Itemizing for those years will yield a charitable tax break.

5. With a donor advised fund, you deduct donations in a year when income is high. The fund will distribute to charities at a later point or in succeeding years. There are account fees.

Are you considering a donor advised fund?You can make a donation and claim a tax deduction for 2021 assuming that you it...
11/15/2021

Are you considering a donor advised fund?

You can make a donation and claim a tax deduction for 2021 assuming that you itemize your deductions. However, you can select your charities now or even wait until 2022 or later to select your favorite recipients. There are things to consider.

1. Is there a minimum initial investment requirement?

2. Can you contribute both cash and stock?

3. Are there initial fees and annual fees that are prohibitive?

If you’re in your 60s or older, it’s vital to understand that other parts of your financial life, namely your Social Sec...
10/15/2021

If you’re in your 60s or older, it’s vital to understand that other parts of your financial life, namely your Social Security and Medicare benefits, could be impacted if you convert your traditional IRA's to ROTH IRA's.

• Taxation of Social Security benefits - If the conversion bumps your income higher, you may find your Social Security benefits are partially taxable or a greater portion of your benefit could become taxable.

• Higher Medicare Part B premiums. Nearly all Medicare enrollees pay a monthly premium for Medicare Part B, which covers doctor visits, tests and outpatient treatment. If the conversion bumps your income higher, you may find that your Medicare Part B premiums increase significantly over prior years.

There has been a surge in rollovers from 401(K) accounts to IRA’s as people take early retirement or change jobs.Here ar...
10/11/2021

There has been a surge in rollovers from 401(K) accounts to IRA’s as people take early retirement or change jobs.

Here are some of the most common mistakes:

1. If you withdraw funds from your 401(k) account, you have only 60 days to deposit the funds into an IRA account. If you miss the deadline, the amount is considered a distribution that will likely need to be included in your gross income for tax purposes.

2. Your employer will usually withhold 20% of your account and send it to the Internal Revenue Service as prepayment of federal-income tax on the distribution. You can avoid this by providing funds to make up for the amount withheld.

3. Rolling over funds to a ROTH IRA will result in a taxable transaction. You must hold funds in a ROTH IRA for at least 5 years before withdrawing earnings. Otherwise, these earnings will be taxable.

For people with income in the $400,000 to $1 million range, selling a home could result in a huge tax bill. The proposed...
10/07/2021

For people with income in the $400,000 to $1 million range, selling a home could result in a huge tax bill.

The proposed increase in capital gains tax rates for those earning $400,000 to $1 million could have a substantial impact on sellers of long held homes in expensive locations such as Los Angeles and New York City.

If selling a home, be sure to include home improvements in the cost basis of the home. Your taxable gain will be lower, thereby saving you tax dollars.

You may want to bunch several years of deductions to lower taxable income. One idea would be to contribute to a charitable fund.

Congress has not passed any new provisions at this point.

Higher earners may want to pull some of next year’s income into this year to avoid higher rates proposed for 2022.The Wa...
09/21/2021

Higher earners may want to pull some of next year’s income into this year to avoid higher rates proposed for 2022.

The Ways and Means provision would raise the top rate on ordinary income like wages or bonuses to 39.6% from 37%. Like the increase in the capital-gains rate, the change would apply above $450,000 of taxable income for joint filers and $400,000 for single filers.

Also, tax deductions such as donations, unreimbursed medical expenses, and state and local taxes would be more valuable in 2022 should tax rates increase.

House Democrats confirm they will pursue “meaningful” change to the $10,000 limit on the federal deduction for state and...
09/20/2021

House Democrats confirm they will pursue “meaningful” change to the $10,000 limit on the federal deduction for state and local taxes.

This has really hurt homeowners who have real estate tax bills each year that exceed $10,000.

Also, taxpayers in states with high state income taxes cannot deduct more than $10,000 in state income taxes.

Presently, the total combined deduction for real estate taxes and state income taxes cannot exceed $10,000.

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