2021 Last Minute Tax Credits You Should Know About
webmanager • May 17th, 2023
As you and your family begin to gear up for the holidays (and hopefully, a much needed break!), there are a few tax credits we want to bring to your attention as time is running out with the end of 2021.
Here are a few last minute tax credits (and one tax penalty) to be aware of before the year ends.
If you’re planning to buy an electric car, time is running out. The IRS allows a credit of up to $7500 for the purchase of new plug-in electrical vehicles in 2021, however, the credit is phased out once the manufacturer has sold 200,000 cars.
For example, Tesla has already met this quantity, so there is no longer a tax credit for purchasing a Tesla.
The allowable tax credit depends on the battery size of the vehicle, so make sure you check the IRS website before you make your purchase.
Fine Details: The credit is equal to $2,500 plus, for a vehicle which 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 in excess of 5 kilowatt hours. The total amount of the credit allowed for a vehicle is limited to $7,500.
For those of you living in California, there is not currently a comparable credit to use, however there are rebates for clean vehicles that range from $1,000 to $7,000. You can find more details here.
I’m sure most of you are aware that contributions made to charities can be deducted from your taxes.
However, this year, due to recent tax changes, you’re now able to donate up to 100% of your adjusted gross income and receive an immediate write-off, provided that you itemize your taxes. If this is something you’re interested in doing, we recommend speaking to your accountant to help you make the elections, as the 100% limit is not automatic.
If you do not itemize your taxes, you can still claim a deduction of up to $300 for cash contributions to qualifying charities during 2021, or $600 for married individuals filing joint returns.
Recommendation: If able to do so, we recommend donating at least $300 this year ($600 if you are a married couple) to a nonprofit close to your heart.
If you are not sure where to contribute, a Donor-Advised Fund might be a good option for now. You can easily set up one up before the end of 2021 and make your cash donation, or donate a variety of other assets. By doing so, you can claim the tax deduction this year, and allow more time to designate your contribution.
Find out more about Donor-Advised Funds (DAF) here, or speak to your accountant to learn more.
Keep in mind that December 31st is the deadline to make charitable donations for 2021. It is expected this tax break will not be back in 2022, so it is essential to make the contribution this year if you want the tax break.
If you started a new business after the pandemic began, and your business was affected by COVID-19, you may be eligible for up to $50,000 in paid wages.
The Recovery Start Up Business Tax Credit is a credit for those businesses who are not eligible for the Employee Retention Credit.
Here’s what you need to qualify:
If you think your business qualifies under these criteria, please reach out to your experienced accountant for help. You may be eligible for up to $50,000 in cash back.
If you’ve been thinking of installing solar panels on your rental property(s), now is the time to do it.
In December 2020, Congress passed an extension of the ITC, which provides a 26% tax credit for solar systems commencing construction in 2020-2022.
The credit is claimed on the year construction is completed, but the amount of the credit is determined based on the year the construction begins.
Sound tricky?
Unfortunately, the application of this credit is.
We recommend working with an experienced construction accountant to help. If you do not currently have a a business accountant who is well-versed in construction, you can book a quick appointment with us anytime.
If you’re a property management firm in California and have non-California resident clients, you may be required to withhold 7% taxes from the rent collected, and submit it to the FTB.
The withholding requirement applies to any rent collected for a California property with non-CA owners, where the rent exceeds, or is expected to exceed $1500 / year.
Speak with your accountant or visit the FTB website to learn more.
There you have it! Our 2021 round up of the most recent tax code changes to be aware of, and a list of tax credits to get in before time runs out.
And with it, is our last post of 2021!
We hope you all have a wonderful holiday break with friends and family, and we look forward to helping you accelerate your business further in 2021.
If you have any questions about any of the tax credits we listed here today, please don’t hesitate to get in touch.
You can book a quick appointment using the calendar here.
Happy Holidays!
Samy Basta brings you more than 20 years experience in tax, financial, and business consulting to his role as founder of Basta & Company. His focus is primarily strategic business planning, empowering clients to set priorities, focus energy and resources, and strengthen operations. In addition, Samy and his firm provide strategic counsel, and technical insight, on a wide range of needs, including tax saving strategies, tax return compliance, as well as choice of entity.
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San Francisco, CA 94111