by Blair Butters | Mar 7, 2023 | Tax Credits
On August 16, 2022, President Biden signed into law the Inflation Reduction Act (IRA), which expanded and extended two nonrefundable tax credits meant to encourage individuals to invest in energy efficiency improvements or clean energy in their homes. The IRA also proposes to lower energy costs, increase cleaner production, and reduce carbon emissions by approximately 40% by 2030. Today, we’re breaking down these two tax credits, how they are changing, and how they will affect you as a homeowner in 2023 and beyond. Energy Efficient Home Improvement Credit Homeowners may be familiar with this first credit, the Nonbusiness Energy Property Credit, which expired at the end of 2021. The credit was extended for tax year 2022, using 2021 parameters, however, the IRA extended and significantly improved the credit for 2023 through 2032 and has given the credit a new name – the Energy Efficient Home Improvement Credit. The old credit, applicable prior to tax year 2023, was worth 10% of the costs of installing certain energy-saving improvements in your home, such as windows, doors, roofing, and insulation. The credit had lifetime limits on the amount of credit taken, such as an overall $500 lifetime limit and a $200 lifetime limit for new windows. This meant credits taken in previous years counted toward the limit. There were also some individual credit limits for any advanced air circulating fans ($50), any qualified natural gas, propane, or oil furnaces and hot water boilers ($150), and any single energy property item ($300), such as certain water heaters and heat pumps. In 2023, the credit is now equal to 30% of the costs...
by Blair Butters | Dec 5, 2022 | student loans, Tax Planning
President Biden, Vice President Harris, and the U.S. Department of Education developed a three-part plan to help federal student loan borrowers transition back to making regular payments post-pandemic. As a part of this plan, the Administration introduced the Biden-Harris Student Debt Relief Plan in August, which would forgive a certain dollar amount of student loan debt for qualifying borrowers. There have been several updates to the plan since its introduction, which we will share with you today. Currently, the Student Debt Relief Plan has been blocked by multiple lawsuits. The plan is currently blocked pending a ruling in the Supreme Court which will hear oral arguments regarding the plan in February 2023 with a decision expected by June 2023. In the meantime, the Department of Education has extended the pandemic-era pause on federal student loan repayments until 60 days after the Department is permitted to implement the program or the litigation is resolved. If the program is not implemented and the litigation has not been resolved by June 30, 2023, payments will resume 60 days after that. Those who have already submitted applications for the program will receive communication from the Department of Education about whether the application qualifies, if the program is implemented. Until the final ruling is delivered by the courts, applications are closed. If the program is implemented, eligible borrowers that fall below income levels of $125,000 for individuals and $250,000 for married couples or heads of households could receive the following: Up to $20,000 of student debt cancellation for Pell Grant recipients Up to $10,000 of student debt cancellation for most other non-Pell Grant recipients ...
by Blair Butters | Oct 26, 2021 | General Tax and Accounting Information, IRS, Tax Credits, Tax Planning
Now that the filing season for 2020 tax returns is over, it’s time to start thinking about next year’s tax return, which may look different from prior years because of the pandemic relief bills, tax law changes, updates, new rules, and annual inflation adjustments. The earlier you begin, the more you can potentially save, and to get a head start, we’re breaking down key tax changes to help you prepare for April 15. Check out this list of 6 tax changes so you can begin preparing today. Child tax credit For the tax year 2021, the child tax credit will be increased from $2,000 to $3,000 for children over age 5 and under age 18 and to $3,600 for children 5 and under. However, for those with modified adjusted gross income above $75,000 for individuals, $112,500 for heads-of-household, and $150,000 for married filing jointly, the credit is reduced gradually until the credit is $2,000 per dependent. The credit is further reduced for those with modified adjusted gross incomes of $400,000 for married filing jointly and $200,000 for all other filing statuses. The enhancement is that, generally, the credit is fully refundable and now includes children who are 17 years old. The credit is claimed on your tax return like in prior years. Another important change to note is that at least half of the credit is paid in advance with monthly installments that began in July and will end in December 2021. The other half of the credit is claimed on your 2021 tax return. You can opt out of the monthly payments using the tool at the IRS...
by Blair Butters | Feb 24, 2021 | General Tax and Accounting Information, Tax Planning
A report by Gallup indicates that the number of people working from home has jumped from 28% in April 2020 to almost 46% in September 2020, showing a rising trend. So how does this affect your taxes? If you’re working from home as a W2 employee, unfortunately, you can’t take any deductions. However, for those reporting their business on Schedule C of their personal income tax return, usually sole proprietors or Single-Member LLCs, or gig economy workers – AKA someone who works on short-term contracts or freelance work as opposed to a permanent job – then there are a number of deductions you can claim. In this month’s blog, we walk you through some of the most common ones and how to calculate them. Your Home Office One of the first things you may be able to deduct is expenses related to your home office. A home office is a space in your house used regularly and exclusively for business purposes. So, for example, if your office is in a second bedroom which is regularly and exclusively used for business, then the room qualifies as a home office. If the room is also used as a spare bedroom when guests are visiting, or as a playroom for the kids, the room does not qualify as it fails to be exclusively used for business. You will need to know the square footage of your home office space and the square footage of your home. This ratio will determine the percentage of various home expenses that can be claimed as a home office deduction. Once you have this information, there are...
by Blair Butters | Feb 12, 2021 | General Tax and Accounting Information, IRS, Tax Planning
2020 was the year that many dreams turned into reality as the health crisis and resulting economic climate spurred many people to start their own businesses. Business Insider recently reported that the number of new businesses applied for in 2020 had reached a 13 year high. If you started your business in 2020, the transition may make you feel apprehensive about filing your taxes for the first time as a business owner, so in this month’s blog we have put together a checklist of items you can use to get prepared. Gather Formal Documentation The first thing you will need in order to file your business taxes is formal documentation. Any tax professional will want to know about your products, industry, the state your business is filed in, and the names of any owners. It’s also a good idea to bring the following documents with you: Articles of Organization or Incorporation The formal name of your business (as registered, if applicable) The structure of your business (LLC, Sole Proprietor, Partnership, Corporation etc.) FEIN, if one was obtained Make sure you have all of this ready for your tax professional to avoid any unnecessary time delays. Financial Documentation The next, and most obvious, documents to gather are your financial statements. You will need: Your profit and loss statement – the financial statement that summarizes the revenues, cost of goods, and expenses incurred during a specified period. For the first year, it is generally from the date business began to the end of the year. Your balance sheet – a financial statement for a business that lists assets, liabilities, and equity...
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