March 2025 tax updates

Tax Relief for California Wildfire Victims

On January 10, 2025, the IRS announced tax relief measures for individuals and businesses in Los Angeles County affected by recent wildfires and straight-line winds that began on January 7, 2025. The deadline to file various federal tax returns and make tax payments has been extended to October 15, 2025.

Key Points of the Relief:

• Tax Payment Extensions: Taxpayers in the affected areas now have until October 15, 2025, to file and pay federal taxes originally due between January 7, 2025, and October 15, 2025. This includes individual income tax returns that were due on April 15, 2025, as well as estimated tax payments.
• Qualified Wildfire Relief Payments: Payments made to taxpayers affected by the wildfires, which are not covered by insurance or other reimbursements, are excluded from taxable income. This includes personal expenses, living costs, and home repairs related to the disaster.
• Penalties Waived: The IRS will abate penalties for late payroll and excise tax deposits due within specific dates as long as they are made by January 22, 2025.
• Casualty Loss Claims: Taxpayers can claim disaster-related losses on their federal income tax return for either the year of the event or the prior year. Details are available in IRS Publication 547.
• Additional Relief Efforts: Affected taxpayers are encouraged to contact the IRS for help with penalties and to request copies of previously filed tax returns without usual fees. Individuals can also take special disaster distributions from retirement plans without incurring the early withdrawal penalty.
• Free Tax Assistance: Free tax preparation help is available through Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) programs for eligible individuals, including military members.

Taxpayers outside the disaster area who need assistance should call the IRS disaster hotline at 866-562-5227. For those impacted, it’s important to act promptly to ensure compliance with the relief measures and to take advantage of the extended deadlines.

Unlock Energy Savings: 2024 Energy Tax Credits

The Inflation Reduction Act of 2022 continues to deliver big financial benefits in 2024, offering homeowners and small businesses valuable energy tax credits for renewable energy upgrades and efficiency improvements. These incentives not only promote sustainability but also provide significant cost savings and long-term financial advantages.

   For Homeowners

• Energy Efficient Home Improvement Credit: Covers up to 30% of costs for upgrades like insulation, windows, and heat pumps (up to $3,200 per year).
• Residential Clean Energy Credit: Get 30% back on solar panels and other renewable energy systems, valid through 2032.

   For Small Businesses

• Energy Efficient Commercial Buildings Deduction (Section 179D): Now offers up to $5.00 per sq. ft. for energy-saving upgrades.
• Investment Tax Credit (ITC): 30% credit for solar panels, wind turbines, and other renewable systems.
• Renewable Electricity Production Tax Credit (PTC): Up to 2.75 cents per kilowatt-hour for renewable energy production.
• New Energy Efficient Home Credit: Builders can claim up to $5,000 per home for constructing energy-efficient residences.
• Alternative Fuel Vehicle Refueling Property Credit: Businesses installing EV chargers and other refueling stations can receive up to $100,000 per unit in tax credits.

2024 RMD Reference Guide: What You Need to Know

If you’re turning 73 in 2024, it’s time to start taking Required Minimum Distributions (RMDs) from your tax-deferred retirement accounts, such as traditional IRAs. Missing an RMD can lead to steep penalties, so understanding the rules is essential.

 Key RMD Rules

• Your first RMD is due by April 1 of the year after you turn 73. After that, RMDs must be taken by December 31 each year.
• RMDs apply to traditional IRAs, 401(k)s, and other tax-deferred accounts, but not Roth IRAs.
• Certain 401(k) holders can delay RMDs if still employed and meeting specific requirements.

 Avoiding Common Pitfalls

• Delaying your first RMD could result in double RMDs in one tax year, potentially increasing your taxable income.
• You must calculate and withdraw RMDs separately for each 401(k) and employer-sponsored plan, but traditional IRA balances can be aggregated for withdrawals.

 Strategies to Lower RMDs & Taxes

• Early withdrawals before the RMD age can reduce future taxable distributions.
• Roth conversions allow you to shift funds from tax-deferred accounts into tax-free Roth IRAs.
• Qualified Charitable Distributions (QCDs) let you donate up to $105,000 tax-free from an IRA to a charity, satisfying RMD requirements.