Tax credits are still available for Qualified Plug-in Electric Drive Motor Vehicles, including passenger vehicles and light trucks. The credit applies to vehicles acquired after 12/31/2009 and is limited to $7,500. State and/or local incentives may also apply.

The credit amount is varied and is based on the capacity of the battery used to power the vehicle: $2,500 plus, for a vehicle that draws propulsion energy from a battery with at least 5-kilowatt hours of capacity, $417, plus an additional $417 for each kilowatt-hour of battery capacity above 5-kilowatt hours.

The credit begins to phase out for a manufacturer's vehicles when at least 200,000 qualifying vehicles manufactured by that manufacturer have been sold for use in the United States (determined on a cumulative basis for sales after December 31, 2009). Phaseouts have been initiated for Tesla, Inc. and General Motors, which means that for tax year 2020, the credit has been reduced to $0. In 2019, the credit was equal to $1,875.

The following requirements must also be met:

• The vehicle must be new (i.e., not a used vehicle that is "new" to the taxpayer).
• The vehicle is acquired for use or lease by the taxpayer, and not for resale. If a qualifying vehicle is leased to a consumer, the leasing company may claim the credit.
• The vehicle is used mostly in the United States.
• The vehicle must be placed in service by the taxpayer during or after the 2010 calendar year.

The credit is claimed on Form 8936, Qualified Plug-in Electric Drive Motor Vehicle Credit and reported on the appropriate line of your Form 1040, U.S. Individual Income Tax Return. For vehicles purchased in 2010 or later, this credit can be used toward the alternative minimum tax (AMT). If the qualifying vehicle is purchased for business use, the credit for the business use of an electric vehicle is reported on Form 3800, General Business Credit.

If you haven't contributed funds to an Individual Retirement Account (IRA) for tax year 2020, or if you've put in less than the maximum allowed, you still have time to do so. You can contribute to either a traditional or Roth IRA until the April 15, 2021, due date, not including extensions.

Be sure to tell the IRA trustee that the contribution is for 2020. Otherwise, the trustee may report the contribution as being for 2021 when they get your funds.

Generally, you can contribute up to $6,000 of your earnings for tax year 2020 (up to $7,000 if you are age 50 or older). You can fund a traditional IRA, a Roth IRA (if you qualify), or both, but your total contributions cannot be more than these amounts.

Traditional IRA. You may be able to take a tax deduction for the contributions to a traditional IRA, depending on your income and whether you or your spouse, if filing jointly, are covered by an employer's pension plan.

Roth IRA. You cannot deduct Roth IRA contributions, but the earnings on a Roth IRA may be tax-free if you meet the conditions for a qualified distribution.

Each year, the IRS announces the cost of living adjustments and limitations for retirement savings plans.

Saving for retirement should be part of everyone's financial plan, and it's important to review your retirement goals every year to maximize savings. If you need help with your retirement plans, give the office a call.

If you have children, one or more of these tax credits and deductions could help your family reduce the amount of tax owed. Let us

take a look:
1. Child Tax Credit
Generally, taxpayers can claim the Child Tax Credit for each qualifying child under the age of 17. The maximum credit is $2,000 per child. Taxpayers who get less than the full amount of the credit may qualify for the Additional Child Tax Credit (see below). The refundable portion of the credit is $1,400 so that even if taxpayers do not owe any tax, they can still claim the credit. A $500
nonrefundable credit is also available for dependents who do not qualify for the Child Tax Credit (e.g., dependents age 17 and older).
2. Child and Dependent Care Credit
If you pay someone to take care of your dependent to work or look for work, you may qualify for a credit of up to $1,050 or 35 percent of $3,000 of eligible expenses. For two or more qualifying dependents, you can claim up to 35 percent of $6,000 (or $2,100) of eligible expenses. The credit percentage is reduced for higher-income earners but not below 20 percent, regardless of the amount of adjusted gross income. This tax credit is nonrefundable.

Even if you don’t have dependent children if you care for an elderly relative and can claim them as a dependent, you
might be able to take the Child and Dependent Care Credit. Please call for details.
3. Earned Income Tax Credit
Taxpayers who worked but earned less than $56,844 in 2020 could qualify for this credit, which is worth up to $$6,660 in 2020. Taxpayers may qualify with or without children. Due to the pandemic, taxpayers can use their 2019 earned income to figure your EITC, if their 2019 earned income was more than their 2020 earned income.
4. Additional Child Tax Credit
This refundable tax credit is for certain individual taxpayers for whom the Child Tax Credit exceeds the amount of income tax owed. The credit is worth $1,400 and may give you a refund even if you do not owe any tax.

Due to the pandemic, taxpayers may be able to use their 2019 earned income to figure this credit if their 2019 earned income is more than your 2020 earned income.
5. Adoption Credit.
It is possible to claim a tax credit for certain costs paid to adopt a child. For details, see Form 8839, Qualified Adoption Expenses
6. Education Tax Credits
An education credit can help with higher education costs. Two credits are available: the American Opportunity Tax Credit and the Lifetime Learning Credit. These credits may reduce the amount of tax owed. If the credit cuts a taxpayer’s tax to less than zero, it could mean a refund. Taxpayers may qualify even if they owe no tax. Complete Form 8863, Education Credits, and file a return to claim these credits.
7. Student Loan Interest
Taxpayers may be able to deduct interest paid on a qualified student loan. They can claim this benefit even if they do not itemize deductions. If you’re not sure if the interest you paid on a student or educational loan is deductible, don’t hesitate to call
Questions?
If you have any questions about tax credits and deductions that could benefit your tax situation, please contact the office.

Whether you are starting a new job or reassessing your financial situation, a new year often means a fresh start. Why not get the new tax year off to a good start as well?

One way people can do this is by checking their federal income tax withholding using the Tax Withholding Estimator on IRS.gov. This online tool is useful because it helps employees avoid having too much or too little tax withheld from their wages. It also helps self-employed people make accurate estimated tax payments. Having too little withheld can result in an unexpected tax bill or even a penalty at tax time, while having too much withheld results in less money in your pocket.

Taxpayers can use the results from the Tax Withholding Estimator to determine if they should:

• Complete a new Form W-4, Employee's Withholding Allowance Certificate and submit it to their employer.
• Complete a new Form W-4P, Withholding Certificate for Pension or Annuity Payments and submit it to their payer.
• Make an additional or estimated tax payment to the IRS.

The Tax Withholding Estimator asks taxpayers to estimate:

• Their 2021 income.
• The number of children to be claimed for the child tax credit and earned income tax credit.
• Other items that will affect their 2021 taxes.

The Tax Withholding Estimator does not ask for personally identifiable information, such as a name, Social Security number, address, and bank account numbers. Also, the IRS doesn't save or record the information entered in the Estimator.

Before using the Estimator, taxpayers should gather their 2019 tax return, most recent pay stubs, and any income documents. These documents will help taxpayers estimate 2021 income and answer other questions asked during the process.

Most income is taxable, including unemployment compensation, refund interest, and income from the gig economy and virtual currencies. Therefore, taxpayers should also gather any documents from these types of earnings, such as W-2s, Forms 1099 from banks and other payers, and Form 1099-NEC. Forms 1095-A, Health Insurance Marketplace Statement may also be useful for those claiming the premium tax credit.

As a reminder, the Tax Withholding Estimator results will only be as accurate as the information entered by the taxpayer. People with more complex tax situations, including taxpayers who owe alternative minimum tax or certain other taxes, and people with long-term capital gains or qualified dividends, should consult a qualified tax professional.

While some workers have returned to their offices, many have not. If you’re working remotely from a location in a different state (or country) from your office, you may be wondering if you will have to pay income tax in both jurisdictions.

The short answer is that it depends on which states you live and work in.

Generally, states can tax income whether you live there or work there. Whether a taxpayer must include taxable income while living or working in a particular state depends on several factors including nexus, domicile, and residency.

In metro Washington, D.C. for example, payroll tax withholding is based on state of residency allowing people to work in another state without causing a tax headache. Other states such as Arkansas, Connecticut, Delaware, Massachusetts, Nebraska, New York, and Pennsylvania tax workers based on job location even if they reside in a different state.

Many states – especially those with large metro areas where much of the workforce resides in surrounding states – have agreements in place that allow credits for tax due in another state so that you aren’t taxed twice. Normally, this isn’t an issue, but let’s say during the pandemic a mandatory office closure allowed you to work remotely from your vacation home. If the tax rate in the remote location is higher than the taxpayer’s home state or the home state doesn’t impose income tax but the state they are working from does, the tax credit in the worker’s home state may not be enough to offset all – or any – tax owed.

During the pandemic, 13 states have agreed not to tax workers who temporarily moved there because of the pandemic including Alabama, Georgia, Illinois, Indiana, Massachusetts, Maryland, Minnesota, Mississippi, Nebraska, New Jersey, Pennsylvania, Rhode Island and South Carolina. Keep in mind, however, that these waivers are temporary and in some cases may only in effect during a mandated government shutdown.
Necessity or Convenience
Another important factor to consider is whether a worker’s remote work location is due to necessity or convenience. If there is a mandatory government shutdown, then it is a necessity. If the option to go back to the office exists, but the worker chooses not to because of health concerns, then the state could view it as convenience.
Keeping Good Records
Keeping good records is always important when it comes to your taxes, but even more so when there are so many unknowns. As such, it’s a good idea to keep track of how many days were worked and how much money was earned in each state.
Help is Just a Phone Call Away
Tax laws are complex even during the best of times. If you’ve been working remotely during the pandemic in a different location than your office, then it pays to consult with a tax and accounting professional to figure out your tax liability and recommend a course of action to lower your tax bill such as changing your withholding.