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Jury selection begins for the Trump Organization’s tax fraud trial in New York. Trump’s family company has been charged with three counts of tax fraud and six other counts that could result in up to $1.6 million in fines—up to $250,000 per tax-related count and up to $10,000 for a non-tax-related count. At the center of the lawsuit are questions around former CFO Allen Weisselberg receiving off-the-books benefits and falsely claiming not to be a New York City resident to evade taxes.
Six property developers are charged with misusing a New York City tax break… and overcharging tenants. The controversial tax program known as 421a was meant to increase housing construction by providing tax benefits to developers who set aside units for people who qualified for affordable housing. The defendants in this case are accused of earning more than $1.6 million from these property tax breaks while charging well above the permitted rent.
IRS inflation adjustments for 2023 may result in less taxation and more income for taxpayers
The agency recently announced next year’s federal income tax brackets, which have each been increased by around 7%.These changes will only affect income reported on 2023 tax returns, due in April 2024. The new income tax brackets are:
This and adjustments to 60 other provisions could mean less taxation for certain income levels. For instance, the IRS has adjusted the 2023 standard deduction, which reduces taxable income for taxpayers who opt not to itemize their deductions. The standard deduction will increase to $13,850 for single filers and $27,700 for married couples filing jointly.
Another notable change is a higher income exemption for the alternative minimum tax rate (AMT). The AMT is intended to offset loopholes that would allow higher-income taxpayers to avoid taxation. In 2023, the AMT income exemption begins at:
The Earned Income Tax Credit (EITC) has also been increased by about 7%. The credit received depends on a taxpayer’s income and dependents—for instance, a taxpayer with three or more qualifying children could receive $7,430 in 2023.
Lastly, taxpayers with healthcare flexible spending accounts (FSA) will be allowed to contribute up to $3,050. These contributions can reduce your overall taxable income. The IRS also increased the maximum carryover allowed for unused FSA funds to $610 per year.
A Chicago tax loophole has caused suburban communities to lose $280 million… leaving less funding for schools, parks, police, and other government programs. The issue stems from a provision that allows investors to take on the tax debt of property owners. If a property owner is delinquent on their property taxes, investors can buy those taxes. This protects the county from seeing a delay in revenue, and the property owner must then pay the investor directly, plus interest. If the property owner fails to repay what is owed, the investor gets the property itself.
The problem is that investors have exploited a loophole called a “sale in error” that allows them to receive a refund on the taxes they bought, plus up to 36% of the interest, instead of the property. Investors have taken advantage of this when the property in question is vacant and difficult to lease or sell.
Investors often use listing mistakes to challenge the tax purchase. In one case, the Cook County Assessor’s website incorrectly said that a home did not have an attic. This error allowed the investor to claim a “sale in error” and receive over $17,000 in interest instead of an uninhabitable property. A recent study showed that this loophole is used about 1,600 times a year, costing Chicago alone $85 million over seven years.
Massachusetts tax relief may be delayed until 2023… at which point the state would be welcoming in a new governor. As state legislators continue to negotiate the tax bill, delays continue to arise, including the emergence of an old law that requires almost $3 billion in surplus revenue to be returned to taxpayers. The Massachusetts Department of Revenue officially repealed this long-forgotten law earlier this month.
To be eligible for the rebate, taxpayers must have filed a state tax return by the October 15th extended deadline. An estimated 3.6 million Massachusetts residents are expected to see a check. Direct rebates will likely be sent out before the holiday season this year and could amount to 7% of your 2022 tax bill. Contention has arisen over how the rebate amount will be calculated, with some lawmakers objecting at the prospect that wealthier taxpayers will mainly benefit. One proposal would cap the refund at no more than $6,500 for even the highest income earners. Otherwise, low-income earners and those who are not required to file an income tax return may receive little to no benefits.
President Biden’s elimination of tax credits for electric vehicles assembled overseas sees increased pushback. With the passing of the Inflation Reduction Act, the $7,500 EV tax credit no longer applied to imported plug-in hybrid or electric vehicles. Foreign automakers like Hyundai Motors have since been lobbying against the new legislation as they anticipate the dramatic impact on their business. Korean trade representatives have also offered to work on addressing supply chain issues in the interest of strengthening US-Korea partnerships.
Hyundai, which is also the parent company of Kia, is currently the second top-selling maker of electric vehicles sold in the US. The South Korean automaker is topped only by Tesla, which supplies about 67% of new EVs sold. Hyundai has argued that they intend to continue to invest in the US market, stating that almost half of their vehicles sold in the US in 2021 were also manufactured in the States.
Supporters of the Inflation Reduction Act emphasize the need to reduce US reliance on foreign companies and encourage domestic production of electric vehicles and batteries as the price for essential components continues to rise.
The recent increase to Social Security benefits may be offset by increased taxation. The Social Security Administration just announced an 8.7% cost-of-living adjustment due to rising inflation. However, this could become less of an overall income bump for taxpayers who find themselves in a higher tax bracket. Taxes on Social Security benefits are based on your “combined income,” which is the sum of your adjusted gross income, non-taxable interest, and half of your Social Security benefits. The current combined income tiers are:
Unfortunately, these income thresholds are not adjusted for inflation, which means that beneficiaries have had to pay more and more taxes on Social Security as years have gone by. For a point of comparison, only 8% of beneficiaries paid taxes on benefits when they were first introduced in 1983. In 2021, 56% of beneficiaries paid taxes on benefits.
The taxation factor may impact retirees who may have been planning to make larger withdrawals from their retirement accounts. Since these withdrawals increase a taxpayer’s overall income, retirees may want to consult a tax adviser to determine how much they can take out without advancing to the next income threshold.
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