Feature Articles Clean Vehicle Credits Expire September 30 Should You Be Making Estimated Payments? The Quirky Math of Partnership Income Tax Tips Timing a Roth IRA Conversion There’s No Advantage to Last-Minute Tax Return Filing Bonus Depreciation Gets a Reprieve QuickBooks Tips Working With Reports in QuickBooks

Clean Vehicle Credits Expire September 30

 

If you’ve been pondering the purchase of a new or used electric vehicle for yourself or your business, you may want to buy sooner rather than later to take advantage of available tax credits. Under the One, Big, Beautiful Bill Act (OBBBA), these credits won’t be available for purchases made after September.

Individual Credits

The Clean Vehicle Credit (Sec. 30D) was scheduled to expire after 2032. Under the OBBBA, the credit is available only through September 30, 2025. In 2022, the Inflation Reduction Act (IRA) significantly expanded the credit for qualifying clean vehicles placed in service after April 17, 2023. For eligible taxpayers, it extended the credit to any “clean vehicle,” including electric vehicles, hydrogen fuel cell cars and plug-in hybrids.

The maximum credit for new vehicles is $7,500, based on meeting certain sourcing requirements for 1) critical minerals and 2) battery components. Clean vehicles that satisfy only one of the two requirements can qualify for a $3,750 credit.

Vans, pickup trucks and SUVs with a manufacturer’s suggested retail price (MSRP) of more than $80,000 don’t qualify for the credit, nor do automobiles with an MSRP higher than $55,000. Qualified vehicles also must undergo final assembly in North America.

The IRA also created a new credit, Sec. 25E, for eligible taxpayers who buy used clean vehicles from dealers. The credit equals the lesser of $4,000 or 30% of the sale price. But the credit can’t be claimed at all if the sale price is over $25,000. The OBBBA also ends this credit after September 30, 2025.

These credits are unavailable to taxpayers with incomes exceeding certain amounts, and additional rules and limits apply.

Business Credit

The OBBBA also eliminates the tax incentive for a business’s use of clean vehicles. The Qualified Commercial Clean Vehicle Credit (Sec. 45W) had been scheduled to expire after 2032. It’s now available only for vehicles acquired on or before September 30, 2025. Depending on vehicle weight, the maximum credit is up to $7,500 or $40,000.

Additional rules and limits also apply to this credit.

Do Your Due Diligence

While these credits can be valuable, don’t rush to purchase a clean vehicle without doing your due diligence. Check whether the vehicle you want to buy is qualified and that you would indeed be eligible to claim the credit. If you have questions regarding any of these clean vehicle credits (or other tax breaks related to purchasing a vehicle) please don’t hesitate to contact the office.

 

 

Should You Be Making Estimated Payments?

 

If your federal tax withholding isn’t enough to cover your total tax liability, you may need to make estimated tax payments. This typically applies if you have income from sources such as interest, dividends, capital gains or self-employment. The following rules explain how to make these payments without incurring an underpayment penalty.

How Much to Pay and When

Individuals subject to estimated tax requirements generally must pay 25% of a “required annual payment” by April 15, June 15 and September 15 of the tax year and January 15 of the following year to avoid an underpayment penalty. If one of those dates falls on a weekend or holiday, the payment is due on the next business day.

So the third installment for 2025 is due on Monday, September 15. Payments are made using Form 1040-ES and may be made electronically or on paper.

Who Must Pay

The general rule is that you may have to pay estimated tax for 2025 if both of these conditions apply:

1. You expect to owe at least $1,000 for 2025, after subtracting your withholding and tax credits, and

2. You expect your withholding and tax credits to be less than the smaller of:

90% of your 2025 tax liability or 100% of your 2024 tax liability (110% if your 2024 adjusted gross income was more than $150,000, or $75,000 if you’re married filing separately in 2025).

Calculating Payments

If you do have to pay estimated taxes, calculating them requires projecting total income, deductions, credits and withholding for the year. After determining the required annual payment, divide that number by four and make four equal payments by the due dates.

But you may be able to use the annualized income method to make smaller payments during part of the year. This method is helpful to people whose income flow isn’t uniform over the year, perhaps because the business is seasonal.

For example, suppose your income comes exclusively from a business operated in a resort area during June, July and August. In that case, you may not have to make an estimated payment, or as large a payment, for the first two installments, and then you’ll need to “catch-up” when you make the third installment payment.

For More Information

If you have questions about the estimated tax rules and how they apply to you, contact the office.

 

 

The Quirky Math of Partnership Income

 

When it comes to taxation, partners in a business may find the math a bit puzzling. You may discover that the amount of partnership income you’re taxed on is more than the amount that was distributed to you. That’s a quirk of taxation that lies in the way partnerships and partners are taxed.

Pass-Through Taxation

Partnerships aren’t subject to income tax at the entity level. Instead, each partner is taxed on the earnings of the partnership, even if the profits aren’t distributed.

Similarly, if a partnership incurs a loss, it’s passed through to the partners. (However, various rules may prevent partners from currently using their shares of the partnership’s losses to offset other income.)

Filing Responsibilities

A partnership must file an information return, IRS Form 1065, “U.S. Return of Partnership Income.” On this form, the partnership separately identifies income, deductions, credits and other items.

This allows partners to properly treat items that are subject to limits or other rules that could affect their treatment at the partner level. Examples of items that may require special treatment include capital gains and losses, interest expense on investment debts, and charitable contributions. Each partner receives a Schedule K-1, showing their share of partnership items for the tax year.

Basis and distribution rules ensure that partners aren’t taxed twice. A partner’s initial basis in his or her partnership interest (which varies depending on how the interest was acquired) is increased by his or her share of partnership taxable income. When that income is paid out to partners in cash, they aren’t taxed on the money if they have sufficient basis. Instead, partners reduce their basis by the amount of the distribution. If a cash distribution exceeds a partner’s basis, then the excess is taxed to the partner as a gain.

Heads Up!

Understanding the ins and outs of partnership taxation can help you avoid surprises come tax time. If you’re unsure how these rules apply to your specific situation, especially with complex items such as losses or special allocations, don’t hesitate to reach out. Contact the office for help with the math and whatever other questions you may have.

 

 

Timing a Roth IRA Conversion

 

Now might be a good time for some taxpayers to convert their traditional IRA to a Roth IRA. Traditional IRA withdrawals are taxed and, if taken early, may be subject to penalties. Also, required minimum distributions (RMDs) must be taken starting at age 73 (or 75 if you won’t turn 73 until after 2032). But qualified Roth IRA withdrawals are tax-free, you can access Roth contributions anytime tax- and penalty-free, and there are no RMDs for Roth accounts.

Converting a traditional IRA to a Roth can allow you to turn tax-deferred future growth into tax-free growth and take advantage of a Roth IRA’s other benefits. But, taxes are due on the converted amount. If your traditional IRA’s value has dropped due to market volatility or you’re in a lower-than-usual tax bracket this year, your tax bill on a conversion will be lower.

Ideally, pay taxes with non-IRA funds to preserve future tax-free growth potential. Conversions work best if you don’t need the money soon, giving it time to grow. You can even spread conversions across multiple years to reduce the tax impact. A Roth conversion can be a smart move, but it’s not for everyone. Contact the office to explore your options.

 

 

There’s No Advantage to Last-Minute Tax Return Filing

 

If you requested an extension to file your tax return after the April 15, 2025, due date, the extended deadline is Wednesday, Oct. 15. If you have the information you need, consider filing now. There’s no advantage to waiting, and last-minute filing may lead to stress and worry.

If you’re concerned about paying any tax owed, the IRS offers short- and long-term payment plans, as well as installment agreements, to taxpayers who qualify. It’s important to act quickly if you owe because any amount that was due April 15 accrues interest until the balance is paid. So, as soon as possible, gather your 2024 tax year records and contact the office for a tax preparation appointment or to ask questions you may have.

 

 

Bonus Depreciation Gets a Reprieve

 

First-year bonus depreciation had been phasing down 20 percentage points annually since 2023 and was set to drop to 0% in 2027. Businesses have been eager to learn the fate of this popular depreciation-related tax break. The good news is that the One, Big, Beautiful Bill Act makes permanent 100% first-year bonus depreciation for the cost of qualified new and used assets acquired and placed in service after Jan.19, 2025.

If you’d been holding off on investing in qualified assets such as office furniture, equipment and off-the-shelf computer software because 2025 bonus depreciation had been only 40%, you may want to move ahead now. Remember, assets must not just be acquired but also be placed in service by Dec. 31 for you to claim 100% bonus depreciation on your 2025 calendar year tax return. Contact the office to learn about these and other business-related tax provisions in the law.

 

 

Working With Reports in QuickBooks

 

You probably make dozens of decisions every day that affect your business. Every time you make a phone call, respond to an email, or have a conversation with a colleague, it’s likely that you’re moved to take some action. You might order more inventory, raise a customer’s credit limit or respond to an estimate you received.

You can make some decisions off the cuff based on your knowledge of the situation or some new information you received. But sometimes you need more details. And you need to see those details in a format that combines multiple related transactions or customers.

That’s why reports are so important in QuickBooks — and why Intuit made them so plentiful and customizable. You can’t make smart decisions without seeing what’s working and what isn’t. Which products and services are selling well, and which aren’t? Are customers late with payments? Are you meeting your own financial obligations responsibly? Here’s how to use QuickBooks’ reports effectively and comprehensively.

Shaping Your Foundation

Even if you’ve been using QuickBooks for a long time, you may not have explored its report settings. There are numerous ways you can make some report setup decisions. Open the Edit menu and select Preferences. Scroll down and click Reports & Graphs. Under My Preferences, you can ask to be prompted to modify report options before opening a report and make your wishes known about graph displays, for example, do you want them to refresh automatically?

Company Preferences are more complex. Do you want summary reports to display on a cash or accrual basis? Other options here involve how aging reports determine their starting point and how you want accounts to be displayed. You can also set up default formatting for reports and assign accounts to actions in the Statement of Cash Flows.

Click OK when you’re done.

Getting Started

Open the Reports menu. If you don’t have a lot of experience with reports in QuickBooks, open the Report Center. It’s missing several of the options in the Reports menu (more about this later), but it allows you to access the most common reports.

Let’s say you want to find out which inventory items you sold into the commercial market during this fiscal year were the most profitable and which weren’t making enough profit. Click Jobs, Time & Mileage in the toolbar, then click the Run icon below the Item Profitability report model. You can get some general information from the default settings: what you paid for each item, its sale price, and the percentage difference (profit).

Customizing the Report

There are a couple of ways you can narrow down the results to find the content you want. Click Customize Report in the upper left corner. The Display tab is highlighted, showing you your options for this specific report’s format (this varies depending on the report). You can change three things here, as you can see in the image below:

1. The Date Range for the report,
2. The display options for your main Columns, like Totals only or Month, and,
3. Whether your subcolumns display profit in dollars or percentages.

If you need help customizing your reports to get the information you need, contact the office for help.

Filtering Your Report

You need to change some more settings to make your report contain only the information you want. Click the Filter tab. This window has three sections. The first is a list of the filters available. The second provides your options for the filters you select. And the third simply lists the filters you’ve chosen.

You’ll notice that QuickBooks has already selected This fiscal year for your Date filter, based on the change you made to the Display. You need to add two more filters to meet your goal for this report (the range of profitability for inventory items purchased by your commercial customers). Scroll down in the Filter list and click Customer Type. In the middle column, open the drop-down menu and select Commercial. Then scroll down again to Item and click All inventory items. The window would look like the one pictured below.

When you’re done, click OK, and your customized report will appear.

TIP: As you may know, you can export QuickBooks reports into Excel. If your customization results in a very lengthy list, you might want to to export your report and sort it, so your profitability percentages or dollar amounts display in ascending or descending order. That way, you can easily see what’s making money and what’s not.

A Critical Skill

You can choose not to customize QuickBooks reports much at all. It may be that the default settings work for you. But it’s important that you understand how to change the display and filter settings of your reports when you need to do so. Please contact the office if you have questions or need assistance. Contact the office for answers to your questions.

 

 

Upcoming Tax Due Dates

August 15

Employers: Deposit nonpayroll withheld income tax for July if the monthly deposit rule applies.

Employers: Deposit Social Security, Medicare and withheld income tax for July if the monthly deposit rule applies.

September 10

Individuals: Report August tip income of $20 or more to employers (Form 4070).

 

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