New Gambling Loss Rules

Valuable tax credits are expiring at the end of this year. Our clients have claimed hundreds of thousands of dollars of federal energy tax credits the last few years! The One Big Beautiful Bill that passed in July changed the expiration date for the Residential Clean Energy Credit and the Energy Efficient Home Improvement Credit to December 31, 2025. Originally designed to expire in 2032, these credits can lead to substantial tax savings. To meet the Residential Clean Energy Credit requirements, you must install one of the following items in your main home or second home. The home can be new or existing. Homes you rent out do not qualify, but renters who improve the property do qualify. The credit is 30% of the expenditure, including labor. The item must be brand new; used items do not count. -Geothermal Heat Pumps -Wind Turbines -Solar Electric Panels -Solar Water Heaters -Fuel Cells (credit limited by the amount of kilowatt hours and only for main homes) -Battery Storage Systems (with equal to or greater than three kilowatt hours) You can claim all of these in the same year if you qualify for them. There are no limits on the amount of credit you can claim, except for Fuel Cells as noted above. To qualify under the Energy Efficient Home Improvement Credit rules, you would need to install one or more of the following items in a house that you live in that already exists. New homes do not qualify and neither do rental houses. The amount of the credit is 30% of the expense, with maximum limits listed below: -Exterior Doors (up to $250 per door, $500 total; must be main home; cannot include labor costs; for homeowners only-not renters) -Certified Home Energy Audit (up to $150; must be main home; for homeowners only-not renters) -Exterior Windows and Skylights (up to $600; must be main home; cannot include labor costs; for homeowners only-not renters) -Insulation and Air Sealing Materials (up to $1,200; must be main home; cannot include labor costs; for homeowners only-not renters) -Central Air Conditioners (up to $600; can be main or second home; you can include labor costs; homeowners or renters can claim) -Natural Gas, Propane, or Oil Water Heaters (up to $600; can be main or second home; you can include labor costs; homeowners or renters can claim) - Natural Gas, Propane, or Oil Furnaces and Hot Water Boilers (up to $600; can be main or second home; you can include labor costs; homeowners or renters can claim) -Electric Panel Upgrade (up to $600; can be main or second home; you can include labor costs; homeowners or renters can claim) --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- -Electric or natural gas heat pumps (up to $2,000; can be main or second home; you can include labor costs; homeowners or renters can claim) -Electric or natural gas heat pump water heaters (up to $2,000; can be main or second home; you can include labor costs; homeowners or renters can claim) -Biomass stoves and boilers (up to $2,000; can be main or second home; you can include labor costs; homeowners or renters can claim) The maximum credit per year is $3,200. You can claim up to $1,200 for anything above the line and $2,000 for anything below the line. Also, new for 2025, it must be from a qualified manufacturer with a PIN or QM Code. (Insulation and Air Sealing Materials are exempt from needing a PIN.) As you can see, the credits can provide substantial savings for you at tax time. You can claim both credits on the same tax return and they do not affect each other’s limits. All items for either credit must meet certain standards-just calling themselves energy efficient is not sufficient. Installation of the improvement needs to occur on or before December 31, 2025-simply ordering it or prepaying for it does not count. Both credits are nonrefundable, which means if the credits are bigger than your tax liability, you will not receive the excess as a refund. In the case of the Residential Clean Energy Credit, any unused credit will carry forward to use in future years. The Energy Efficient Home Improvement Credit does not carry forward. If you have already installed energy efficient improvements this year, make sure to let your tax preparer know. If you still plan to install energy efficient improvements, you may want to consult your tax advisor before making your purchase to make sure you maximize your tax savings.  Mike Sylvester, CPA

If you have been planning to buy a clean vehicle, you will want to act soon. Right now, there are tax credits for both individuals and businesses that can make buying an electric vehicle more enticing. However, the One Big Beautiful Bill will end these tax credits as of September 30, 2025! What is a clean vehicle? The IRS says that a clean vehicle is one that gets plugged in (aka an electric vehicle) or a fuel cell electric vehicle. Currently, if you buy a new clean vehicle for personal use, it can qualify you for the Clean Vehicle Credit. If you purchase a new car, the credit can be up to $7,500. Certain used electric vehicles can earn you a credit of up to $4,000. Tax credits are a dollar-for-dollar savings on your tax bill, so these are substantial savings! To qualify for the credit, the vehicle must meet several guidelines. To see if your vehicle qualifies, you can go to fueleconomy.gov. Also, the following income thresholds must be met: For new vehicles: -Modified AGI in the year of delivery (or the year before delivery) is no more than: -$150,000 if single, -$225,000 if head of household, -$300,000 if married filing jointly -Vehicle cost no more than -$55,000 if a sedan, -$80,000 if a SUV, pickup, or van For used vehicles: -Modified AGI is no more than: -$75,000 if single, -$112,500 if head of household, -$150,000 if married filing jointly -Vehicle cost no more than $25,000 In the case of businesses and tax-exempt organizations, the Commercial Electric Vehicle Credit allows a credit up to $7,500 for vehicles under 14,000 pounds and up to $40,000 for vehicles weighing 14,000 pounds or more. There are no income limits or price caps for businesses to qualify, but there are several eligibility requirements that must be met. You can go to fueleconomy.gov to see if your vehicle qualifies. Before taking these credits, you must make sure you did not get a point-of-sale rebate. Instead of waiting to get the tax credit when you file your taxes, you could have taken the option to take the credit at the time you purchased the vehicle which would have reduced the price you paid for the vehicle. You cannot have both a tax credit and a point-of-sale rebate for the same vehicle. Remember, these credits end September 30 th , 2025 so you must purchase and take delivery of your vehicle by then. Ensure you fill out your tax planner correctly so we can ensure you get these tax credits on your 2025 income tax returns.  Mike Sylvester, CPA

The Tax Professional Industry Is Shrinking The number of Certified Public Accountants in the United States is shrinking, and this trend is only expected to continue—and likely get worse. Three hundred fifty thousand more people have left the accounting industry than have joined it since 2020, and this has been caused by: 75% of CPAs are at or nearing retirement age Fewer people are taking and passing the CPA exam Further, many employees are leaving because they do not like the insane hours and want to focus on improving their quality of life. In our area, one or two firms close each and every year. A lot of firms are consolidating and becoming larger. The total number of firms in our area is half of what it was back in 2008. This is expected to continue. Things are very difficult in our industry, and 530 different potential new clients called our firm last year—and we spent nothing on advertising. Realize we have a total of 950 clients today. Considering we do not advertise, this honestly tells you everything you need to know about our industry. A majority of CPA firms today are not taking on any new clients because they are full—or, more likely, overfull. The three most common reasons why new clients contact us are: Prior CPA retired or died Prior firm got bought out and they dislike the new firm They cannot get questions answered We are still taking on new clients; however, we are being choosy who we onboard. Our firm is fortunate. The average age of the ten people at our firm is 41 years old. Compared to other CPA firms, that is extremely young. We already have four CPAs. We have two employees who we expect will be CPAs within the next year and another who will be an Enrolled Agent. It is a great time to be a CPA! We look forward to working with you for many years! Mike Sylvester, CPA

The Internal Revenue Service will lose 25% of its total workforce in early and mid-2025. Many in Congress want to cut the IRS workforce even more next year. The IRS was already struggling to do its job before so many people were let go. For example: The Fort Wayne office was closed, along with many other offices around the country. The phone system is terrible. It is hard to get an agent on the phone, and disconnections are very common. They are issuing a record number of notices to taxpayers. Most of the notices are wrong. Worse, they have removed much of the information that used to be listed on the notices. This makes it much harder to deal with those notices and requires us to call them more and write them more letters. Their computer systems are, in some cases, 40 years old and slowly failing. The IRS has to deal with the newly passed tax laws, which are extremely complicated and will require many new forms and instructions. We have several clients who have had to wait well over a year for items to be resolved, and we expect that to get worse. The IRS has its fifth Commissioner already this year, and the current Commissioner is completely unqualified for the job. The Indiana Department of Revenue (INDOR) is also declining; however, it is more functional than the IRS. INDOR is issuing more notices and has removed a lot of information from their notices as well. INDOR’s budget has been cut by 5% this year and another 5% the following year. It looks as if they will not be allowed to hire anyone for 27 months. Further, the IRS and INDOR both have an aging workforce, and a large number of employees will retire over the next few years. The taxing agencies are getting harder to deal with, and we expect the IRS will be very difficult to deal with. All of this will be difficult for both you and our firm to deal with it. That being said, we are developing a plan to deal with it!  Mike Sylvester, CPA

Congress passed and President Trump signed into law major changes to the federal income tax code. These changes are very complicated and provide tax planning opportunities. Most of these changes are beneficial to taxpayers. Please ensure you read our email newsletters as we will be discussing many of the major provisions over the next few months. The changes are very complicated and: Some only affect certain years Most of them phase out at specified income levels Some require new forms Many require guidance from the IRS to be issued We will attend a large amount of training on these new provisions and do not expect much of the IRS guidance to be available until October 2025. Karena, Brent, and I can be hired to provide tax planning and help you minimize your income taxes. Please reach out to us in October of 2025.  Mike Sylvester, CPA

Summer has arrived in Fort Wayne, Indiana. Both the Internal Revenue Service and The Indiana Department of Revenue are sending more incorrect tax notices. Worse both have changed their notices to provide little, or any information, forcing us to reach out to them and talk to them to find out what their notice means. Both agencies are struggling due to budget cuts. We expect this to get worse over the next couple of years. We are happy to help you with tax notices; however, they currently take a long time to resolve, and we charge separately for resolving tax notices. The Internal Revenue Service is in complete disarray due to DOGE cuts and some reports show that the IRS may only answer 16% of phone calls they receive next tax season. Further, we are seeing it take the IRS years in some cases to respond to notices, and it now often takes them 6 to 12 months to process amended returns, old year returns, and returns for those who are deceased.  The tax agencies are much harder to deal with than they were five years ago; and we expect this to get worse due to budget cuts.

SBS CPA Group implemented TaxDome this year. Our clients really like the easy-to-use portal, and more than half of our clients are using this platform. We expect that number to grow significantly. We like TaxDome and have received great feedback from our clients. A copy of your tax returns is in TaxDome. You can retrieve them yourself any time. If you need help please reach out to Nikkie Reyes at Admin@sbscpagroup.com or call her at 260-407-5000 and she can help you retrieve a copy of your tax returns from TaxDome or, if needed, she can get them to you in another way. If you have not opted into TaxDome, please opt in. Just email Nikkie or call her and she will help you opt in. If you are married and file a joint return both of you need to opt into TaxDome. Opting into TaxDome is not required for current clients next year. We really like TaxDome, and you will too. Please give it a chance. Mike Sylvester, CPA

The Original Purpose of Social Security: A Three-Legged Stool Social Security is a cornerstone of the United States' social safety net. Many Americans depend on this program to fund their retirement. The most recent data available from the Social Security Administration highlights the program's critical role in retirement planning. Social Security benefits account for approximately 30% of the income for individuals ages 65 and older. Retirement income was envisioned as a three-legged stool consisting of pensions, personal savings, and Social Security, each contributing one-third. The program was never intended to serve as the primary source of retirement income. Many Lower-Income Retirees Rely Heavily On Social Security 51.8% of individuals ages 65 and older depend on Social Security for half or more of their income. 24.7% of people in this age group rely on it for 90% or more of their income. Statistics Regarding Which Retirees Depend On Social Security The extent of reliance varies significantly by income quintile ; note the first quintile is the lowest 20% of taxable income and the fifth is the highest 20%: In the 1st quintile, 64.1% rely on Social Security for 90% or more of their income in retirement. In the 2nd quintile, 47.8% rely on Social Security for 90% or more of their income in retirement. All the way up to the 5th quintile, none of whom rely on Social Security for 90% or more of their income in retirement. Can Social Security Survive Beyond 2033? The program faces significant challenges. Without reform, Social Security will not be able to pay full benefits by 2033 . This presents a critical issue for Congress, as reductions in benefits are politically and socially untenable. Many changes are being made to the program via the Department of Government Efficiency. Further The Social Security Fairness Act was passed into law on January 5 and this brought more changes to the program. How Social Security Benefits Are Calculated Despite its importance, many people are unaware of how their Social Security benefits are calculated. Since the Social Security Administration ceased mailing statements in 2011, individuals must proactively set up an online account to access this information. The benefit formula is intentionally progressive, favoring lower-income earners by replacing a higher percentage of their income. For higher-income earners, Social Security becomes less significant as a percentage of their total retirement income. Terminology For Calculating Your Social Security Benefit 1. Credits: To qualify, individuals must earn 40 credits. In 2025, one credit is earned for every $1,810 in covered earnings (most often wages), with up to four credits given annually. 2. Average Indexed Monthly Earnings: The AIME figure is based on a worker's 35 highest-earning years, adjusted for inflation. If fewer than 35 years of earnings exist, zeros are averaged in. 3. Primary Insurance Amount: This is the monthly benefit a person receives at full retirement age. PIA is calculated using a formula adjusted annually for inflation. 2025 Social Security Payout Example: How The Formula Works Bend points are critical to the calculation and can be used to ensure you draw as much as possible in retirement. For a retiree with an AIME of $7,391 (This is annual wages of $88,692 in 2025 dollars): • 90% of the first $1,226 = $1,103.40 • 32% of the amount between $1,226 and $7,391 = $1,972.80. • Total PIA = $3,076.20 (before Medicare premiums). Strategies To Maximize Your Social Security Benefits To optimize benefits: • Aim for an AIME of at least $1,226, as the first tier yields a 90% replacement rate. • Understand that amounts above $7,391 are replaced at only 15%. Reviewing your lifetime earnings is crucial to ensure accuracy. Errors are far easier to correct early on than later on, when reconstructing decades-old income records may be challenging. Will Your Social Security Be Taxed? What Retirees Should Know Since 1983, up to 85% of Social Security income has been subject to federal taxes, depending on other income sources. This makes the program more progressive but also adds complexity to retirement planning. Consider discussing this with your tax professional and financial planner. When Should You Start Collecting Social Security? When to begin drawing Social Security benefits is a critical decision, particularly for married couples. Meeting with a qualified financial planner may be appropriate. Starting benefits early results in reduced monthly payments, while delaying up to age 70 increases them. Careful analysis and planning are essential to maximize lifelong benefits. Final Thoughts: Why Understanding Social Security Matters More Than Ever Social Security is a vital program for most Americans. Understanding its mechanics and planning effectively can significantly impact your retirement security and should be carefully considered before retirement. I do some consulting on this topic and if you want to hire me to do some Social Security planning please send me an email at Mike@sbscpagroup.com . Mike Sylvester, CPA

Tax Season hours at SBS CPA Group (Feb 2 nd -April 15 th ) Monday thru Friday 8:30am to 6:00pm Saturday 9:00am to 4:00pm