Uncategorized

1 2 3 16

You May Not Get Any Amended Form 1099s for Investment Income This Tax Season

Share This:

smart-investmentsOne of the more annoying aspects of tax filing has been the amended Form 1099s that people receive from investment brokers late in the filing season that require amended returns. Well, the number of these amended Form 1099s may decline substantially this filing season.

For investment income Form 1099s filed after December 31, 2016 (i.e., for tax years 2016 and later) there is a new safe harbor for de minimis errors on informational returns. If the broker makes an error that differs from the correct amount by no more than $100 or tax withheld differs by no more than $25, the broker is not required to issue a revised Form 1099 unless the payee elects that the safe harbor not apply.

Most of the corrected Form 1099s issued late in the filing season tend to report changes that are fairly small amounts, and they are generally under $100. So this safe harbor should substantially reduce the number of amended tax returns that are required because of corrected investment income Form 1099s.

If you have any questions on how this applies to you, please feel free to give us a call at 248-538-5331.

freeconsultation

Buzzkill Disclaimer:  This post contains general tax information that may or may not apply in your specific tax situation. Please consult a tax professional before relying on any information contained in this post.

Is This the End of the Individual Mandate?

Share This:

crazy-sign1The IRS recently announced that it will not reject 2016 tax returns that are silent on whether the taxpayer has complied with the individual mandate of the Affordable Care Act.  These provisions require taxpayers to have qualifying health care coverage, qualify for an exemption, or pay a penalty.  The IRS previously stated that such “silent” returns would be rejected; however, the IRS has shifted its policy to comply with a recent Presidential executive order.  While the individual mandate is still law, it is possible that the IRS may not enforce the penalty.  Caution is advisable.  It is still very early in this process and guidance is still vague.

Background on the Individual Mandate

On their tax returns, taxpayers who had qualifying health coverage for every month of 2016 for themselves, their spouses, and dependents had to check the box on line 61 (Health Care: Individual Responsibility).  A taxpayer that couldn’t check the box because there were coverage lapses must generally either claim a coverage exemption or pay the penalty for the lapse months.

The Executive Order

President Trump’s first executive order stated his intent to seek prompt repeal of the ACA.  The executive orders stated:

To the extent permitted by law, the Secretary of Health and Human Services and the heads of all other executive departments and agencies with authorities and responsibilities under the Act shall exercise all authority and discretion available to them to waive, defer, grant exemptions from, or delay the implementation of any provision or requirement of the Act that would impose a fiscal burden on any State or a cost, fee, tax, penalty, or regulatory burden on individuals, families, healthcare providers, health insurers, patients, recipients of healthcare services, purchasers of health insurance, or makers of medical devices, products, or medications.

While the Trump Administration cannot simply repeal the individual mandate, which is part of a law passed by Congress, they could make the regulatory exemptions from it so broad that the exemptions swallow the rule and the individual mandate is essentially unenforced.  Possibly…

One cause for concern is that even though the IRS will now process returns that are silent on compliance with the individual mandate, the IRS says that if it has questions about a tax return, taxpayers may receive follow up questions and correspondence at a future date.

Based on existing law prior to the executive order, the IRS will not issue liens or levies to collect the penalty and they will not initiate audits based on nonpayment of the penalties.  The IRS’ only recourse for nonpayment of the penalty is to reduce refunds owed to taxpayers.

If you have any questions on how this applies to you, please feel free to give us a call at 248-538-5331.

freeconsultation

Buzzkill Disclaimer:  This post contains general tax information that may or may not apply in your specific tax situation. Please consult a tax professional before relying on any information contained in this post.

Home Office Deductions

Share This:

When you qualify to take a home office deduction, the business
portion  of the following expenses (which are usually not deductible) become deductible:

  • utility costs
  • home insurance premiums
  • repairs
  • the lower of the cost of your home or its fair market value (this is done through depreciation deductions)

A couple of caveats:

  • the home office deduction is limited to the income from the business (or job) for which you are using the home office
  • home office deductions for employees are only allowed if the employee’s home office is used for the convenience of the employer
    • So if your employer provides you with an office at work, but you choose to work at home, you can’t take a home office deduction because you are working at home for your own convenience.
    • If your employer does not provide you with an office at work (or the availability of the employer’s office is too restrictive), your home office is more likely to be for the convenience of your employer and be deductible.

Requirements of the Home Office Deduction

A home office must be used REGULARLY and ***EXCLUSIVELY***as:

  • your principal place of business
  • a place where you meet with customers or clients
  • connected with your business if your home office is in a separate structure

If there is any personal use of your home office, it is not being used exclusively for business and the home office deduction is not allowed.  There are only two exceptions to the exclusivity rule:

  • you are running a daycare out of your home
  • the home office is being used to store inventory

If you are running a daycare or using your home office to store inventory, you can take a home office deduction even if the home office is not being used exclusively for business (but the home office deduction is reduced by the percentage that it is being used for personal reasons).

Principal Place of Business Requirement

There are two ways to meet the principal place of business requirement:

  • You meet the facts and circumstances test
    • the nature of the work performed at each location
    • the amount of time you spend at each location is considered.
  • You perform managerial or administrative work out of your home office, and you do not perform substantial administrative or managerial work at another fixed location.

Example:  Doc is a cardiologist who has a home office where he:

  • does billing work
  • reads medical journals
  • schedules appointments
  • does some bookkeeping work for his business

Under the facts and circumstances test, the IRS looks to Doc’s business and the nature of the work he performs at each location.  Doc is a cardiologist and performs surgery and consults at hospitals.  Since the work of a cardiologist is primarily surgical and consultative, Doc cannot take a home office deduction because his primary work is done at hospitals.

However, Doc can take a home office deduction because he performs managerial and administrative work out of his home office (and doesn’t do such work at other locations). 

This fact scenario is based on the Solimon v. Commissioner case.  In this case, the Supreme Court agreed with the IRS and disallowed a home office deduction under the facts and circumstances test.  Congress responded by changing the law to allow home office deductions for administrative and managerial work done in a home office.

A very important advantage of having your home as your principal place of business is that commuting expenses become deductible.  Normally, your commute to your first business stop (and from your last business stop to your home) are nondeductible.  When your home is your principal place of business, commuting expenses from your home office to your first business stop (and from your last business stop to your home office) become deductible.

A Place where You Meet with Customers/Clients

You must actually meet with customers/clients at your home (i.e., teleconferencing or videoconferencing does not count).  Not much more to say here.

Connected with Your Business if the Home Office is in a Separate Structure

The “connected with” requirement is a much less stringent requirement to meet than the principal place of business requirement.  A separate structure can include a detached garage or barn.  The reasoning for the less stringent standard is because a separate structure is less likely to be used for personal reasons (e.g., you are more likely to watch TV or have company in your den than you are to watch TV or invite company to your detached garage).

Simplified Home Office Deduction

There is a simplified method of computing the home office deduction.  The home office deduction can be calculated by multiplying $5 by the square footage of the home office.  The maximum square footage of the home office under this method is 300 square feet, and the maximum home office deduction will therefore be $1,500.  Of course, taxpayers still have the option of calculating the home office deduction under the actual expenses method if it results in a larger deduction.

Taxpayers who use the simplified method may still fully deduct mortgage interest, real estate taxes, and casualty losses as itemized deductions.  Additionally, businesses expenses such as advertising, wages, and supplies are still deductible.   Depreciation may not be claimed.

Use the Power of Positive Mental Attitude to Lower Your Taxes (2017 Top Tax Scams)

Share This:

scamThe IRS is in the process of releasing its 2017 Dirty Dozen list of tax scams. It updates this list each tax season to alert taxpayers of tax scams they may encounter during the filing season. Tax scams making the list this year include:

Falsely Padding Deductions

The majority of taxpayers file honest and accurate tax returns each year. However, each year some taxpayers “fudge” their information. This is why falsely claiming deductions, expenses or credits on tax returns remains on the “Dirty Dozen” list of tax scams.

Significant penalties may apply for taxpayers who file incorrect returns including:

  • 20 percent of the disallowed amount for filing an erroneous claim for a refund or credit.
  • $5,000 if the IRS determines a taxpayer has filed a “frivolous tax return.” A frivolous tax return is one that does not include enough information to figure the correct tax or that contains information clearly showing that the tax reported is substantially incorrect.
  • In addition to the full amount of tax owed, a taxpayer could be assessed a penalty of 75 percent of the amount owed if the underpayment on the return resulted from tax fraud.

Taxpayers may be subject to criminal prosecution and be brought to trial for actions such as:

  • Tax evasion
  • Willful failure to file a return, supply information, or pay any tax due
  • Fraud and false statements
  • Preparing and filing a fraudulent return, or
  • Identity theft.

Criminal prosecution could lead to additional penalties and even prison time.

Excessive Claims for Business Credits

Avoid improperly claiming the fuel tax credit, a tax benefit generally not available to most taxpayers. The credit is generally limited to off-highway business use, including use in farming. Taxpayers should also avoid misuse of the research credit. Improper claims generally involve failures to participate in or substantiate qualified research activities and/or satisfy the requirements related to qualified research expenses.

Inflated Refunds

“Exercise caution when a return preparer promises an extremely large refund or one based on credits or benefits you’ve never been able to claim before,” said IRS Commissioner John Koskinen. “If it sounds too good to be true, it probably is.”

Watch Out for Fake Charities

Be on guard against groups masquerading as charitable organizations to attract donations from unsuspecting contributors. Be wary of charities with names similar to familiar or nationally-known organizations. Contributors should take a few extra minutes to ensure their hard-earned money goes to legitimate and currently eligible charities. IRS.gov has the tools taxpayers need to check out the status of charitable organizations.

Watch Out for Crooked Tax Preparers

Be on the lookout for unscrupulous return preparers. The vast majority of tax professionals provide honest high-quality service. But there are some dishonest preparers who set up shop each filing season to perpetrate refund fraud, identity theft and other scams that hurt taxpayers. Legitimate tax professionals are a vital part of the U.S. tax system.

Be Vigilant Against Criminals

Tax-related Identity theft – with its related scams to steal personal and financial data from taxpayers or data held by tax professionals – remains a top item on the Dirty Dozen list because it remains an ongoing concern even though progress is being made.

The IRS and its partners remind taxpayers they can do their part to help in this effort. Taxpayers and tax professionals should:

  • Always use security software with firewall and anti-virus protections.
  • Make sure the security software is always turned on and can automatically update.
  • Encrypt sensitive files such as tax records stored on the computer.
  • Use strong passwords.
  • Learn to recognize and avoid phishing emails, threatening phone calls and texts from thieves posing as legitimate organizations such as a bank, credit card company and government organizations, including the IRS. Do not click on links or download attachments from unknown or suspicious emails.
  • Protect personal data. Don’t routinely carry a Social Security card, and make sure tax records are secure. Treat personal information like cash; don’t leave it lying around.

Phone Scams

Phone calls from criminals impersonating IRS agents remain an ongoing threat to taxpayers. The IRS has seen a surge of these phone scams in recent years as scam artists threaten taxpayers with police arrest, deportation and license revocation, among other things.

Phishing

Taxpayers need to be on guard against fake emails or websites looking to steal personal information. The IRS will never send taxpayers an email about a bill or refund out of the blue. Don’t click on one claiming to be from the IRS. Be wary of strange emails and websites that may be nothing more than scams to steal personal information.

If you have any questions on how this applies to you, please feel free to give us a call at 248-538-5331.

freeconsultation

Buzzkill Disclaimer:  This post contains general tax information that may or may not apply in your specific tax situation. Please consult a tax professional before relying on any information contained in this post.

IRS Issues Reminder of What Is Needed to Prove Charitable Deductions

Share This:

charitable donationsAs people are getting their last minute tax deductions in before the end of the year, the IRS published reminders to taxpayers of what documentation is needed to claim charitable donations.

The documentation requirements are strict and if there is any deficiency in proof, the IRS can disallow the deduction even if you can prove payment with a canceled check or receipt.

So, here are the requirements:

Rules for Clothing & Household Items

To be deductible, clothing and household items must be in good condition or better. A clothing or household item (e.g., furniture, furnishings, electronics, etc.) for which a taxpayer claims a deduction of over $500 does not have to be in good condition if the taxpayer includes a qualified appraisal of the item with the return.

Donors must get a written acknowledgment from the charity for all gifts worth $250 or more.

Rules for Donating Money

To deduct donations of money, regardless of amount, the taxpayer must have a bank record or a written statement from the charity showing the name of the charity and the date and amount of the contribution.

Bank records include: canceled checks, bank or credit union statements, and credit card statements. The bank record should show the name of the charity, the date of the donation, and the amount paid.

For payroll deductions, the taxpayer should retain a pay stub, a Form W-2 showing donations, or other document furnished by the employer showing the total amount withheld for charity, along with the pledge card showing the name of the charity.

For money donations $250 or more, the taxpayer MUST receive an acknowledgment from the charity BEFORE filing the tax return in order to claim the deduction. If an acknowledgment is not received, the taxpayer cannot claim the deduction even if proof of donation is established by bank record.

Other Reminders

Only donations to qualified organizations are deductible. Donations directly to needy individuals are not deductible. The IRS maintains a database of qualifying organizations at https://apps.irs.gov/app/eos/mainSearch.do;jsessionid=mg3hp1dT8jJZjNPqoF3SdA__?mainSearchChoice=pub78&dispatchMethod=selectSearch

Contributions are deductible in the year made. Thus, donations charged to a credit card before the end of the year count for 2015 even if the credit card bill isn’t paid until the following year. Donations by check are deductible in 2015 if they are mailed out before the end of the year.

For individuals, only taxpayers who itemize their deductions can claim deductions for charitable contributions.

For donations of all property, including clothing and household items, the taxpayer should get from the charity a receipt that includes the name of the charity, the date of the contribution, and a reasonably detailed description of the donated property.

To see how this applies to you, give us a call at 248-538-5331.

freeconsultation

Buzzkill Disclaimer:  This post contains general tax information that may or may not apply in your specific tax situation. Please consult a tax professional before relying on any information contained in this post.

Michigan’s New Minimum Wage

Share This:

minimum-wageA little over two years ago, Governor Snyder signed a law that increased the minimum wage.  Under this law, the minimum wage for 2017 will be $8.90.  It will again increase in 2018 to $9.25 per hour.  Beginning in January 2019, the minimum wage will be indexed for inflation.  The minimum wage increase for each year will not take effect if the unemployment rate in Michigan is 8.5% or more in the year prior to the year of the minimum wage increase.

Training Wage is Still Available

As existed under prior law, an employer may pay a new employee who is under age 20 an hourly training wage of $4.25 for the first 90 days of that employee’s employment.  After 90 days has passed, the employee must be paid at least minimum wage.

 Minor Minimum Wage is Still Available

The minimum wage for an employee who is less than 18 years of age is 85% of the general minimum wage listed above.  This is not a new rule.

 Minimum Wage for Tipped Employees

The current minimum wage for tipped employees is $3.23 per hour.  It will increase to $3.38 per hour in 2017.  To qualify for this lower rate, the following must occur:

  • the employee receives gratuities in the course of employment
  • the tipped minimum wage plus the gratuities received must be at least equal to the general minimum wage (i.e., in 2016 the tips received per hour plus the tipped minimum wage of $3.23 must be at least equal to the general minimum wage of $8.50).  If there is a shortfall, the employer must pay the shortfall to the employee.

 Overview of Minimum Wage Rates

 The schedule of minimum wage increases under the law signed two years ago is:

Minimum Wage

Minimum Wage for Tipped Employees Minimum Wage

for Minors

Training Wage (first 90 days only)

Prior to September 1, 2014

$7.40

$2.65 $6.29 $4.25
September 1, 2014

$8.15

$3.10

$6.93

$4.25

January 1, 2016

$8.50

$3.23

$7.23

$4.25

January 1, 2017

$8.90 $3.38 $7.57

$4.25

January 1, 2018

$9.25

$3.52

$7.86

$4.25

 

If you have any questions on how this applies to you, please feel free to give us a call.

 

freeconsultation

Buzzkill Disclaimer:  This post contains general tax information that may or may not apply in your specific tax situation. Please consult a tax professional before relying on any information contained in this post.

IRS Scrutinizing Aggressive Tax Strategy

Share This:

captive insuranceI always get a kick when I see a book or an article with “what your CPA doesn’t want you to know” in the title.  The strategy that is being pushed is either a well established strategy that most competent CPAs already know about or the strategy is a sham.  One strategy that fits more closely into the latter category is the captive insurance company.

The Basics of a Captive Insurance Company

Basically this strategy involves a profitable business that sets up a related captive insurance company.  The business enters into an insurance agreement with the related insurance company to cover risk the likelihood of which is almost certain never to occur.  The business will take a deduction for the insurance premiums.  The captive insurance company files an election under IRC  Section 831(b) to only pay tax on investment income–basically the captive insurance company does not pay tax on the premiums it receives–it only pays tax on the investment income it earns on the premiums.

Example:  Sham-How Corp is expecting profit of $200,000 this year.  To shelter some of its income, it forms a captive insurance company.  It then takes out a policy covering risk of a Godzilla attack.  It pays the captive insurance company $100,000 in premiums.  Sham-How Corp takes a $100,000 deduction.  The captive insurance company does not pay tax on the $100,000 of premiums it receives–it only pays tax on the investment income it earns on the $100,000.  Wanting to push its luck even more, Sham-How Corp then borrows $100,000 from the insurance company (loans are tax-free).

The Party is Ending

While these transactions have worked, they are very aggressive.  The IRS is classifying captive insurance arrangements as a transaction of interest.  This classification requires businesses entering into these transactions to disclose the transaction to the IRS.  This will subject the transaction to close scrutiny–someone just called the cops and the party is winding down.

Why the Scrutiny?

The IRS is scrutinizing captive insurance arrangements because these arrangements tend to have the following characteristics:

  • the coverage involves an implausible risk
  • the coverage does not match a business need or risk of the business
  • the description of the coverage in the insurance policy is vague, ambiguous, or illusory
  • the coverage duplicates coverage provided to the business by an unrelated, commercial insurance company, and the policy with the commercial insurer often has a far smaller premium.

The premiums paid to the captive insurance company have one or more of the following characteristics:

  • the insurance premiums are designed to be deductible
  • the payments are determined without an underwriting or actuarial analysis that conforms to insurance industry standards
  • the premium payments are not made consistently with the schedule in the policy
  • the premiums are set without comparing the amounts of the premiums to premiums that would be made under policies with unrelated insurance companies

The management of the captive insurance company has one or more of the following characteristics:

  • the insurance company fails to comply with some or all of the laws applicable to insurance companies in the jurisdiction where it is organized
  • the insurance company does not issue policies or binders in a timely manner consistent with industry standards
  • the insurance company does not have defined claims administration procedures that are consistent with industry standards
  • the insured does not file claims for each loss that is covered by the policy
  • the insurance company does not have adequate capital
  • the insurance company invests its capital in illiquid or speculative assets usually not held by insurance companies
  • the insurance company loans or otherwise transfers its capital to the business, related businesses, or owners of the business.

For tax strategies that work, give us a call at 248-538-5331.

freeconsultation

Buzzkill Disclaimer:  This post contains general tax information that may or may not apply in your specific tax situation. Please consult a tax professional before relying on any information contained in this post.

Deducting Investment Interest

Share This:

investment interest expenseInvestors are allowed to deduct interest expense they pay on debt incurred to purchase or carry property held for investment.  Property held for investment includes any property producing interest, dividends, annuities, royalties, and gain-generating property other than that used in a business.

How the Investment Interest Expense Deduction Works

Investment interest is deductible as an itemized deduction.  It is limited to net investment income.  Net investment income is defined as investment income that exceeds investment expenses.  Investment income includes interest and includes gains that are not subject to the reduced capital gains tax rate (e.g., short term capital gain taxed at ordinary rate is qualifying investment income while long term capital gain taxed at 15% is not qualifying investment income).  Also excluded from qualifying investment income are qualified dividends subject to the lower capital gains tax rates.  An election exists whereby a taxpayer can treat qualifying dividends and capital gains as ordinary income and treat such income as qualifying investment income in order to deduct investment interest expense, but this election generally won’t be beneficial.

Watch Out for Tax Exempt Securities

Investment interest does not include interest expense incurred to purchase tax-exempt securities, so such interest expense is not deductible.  This rule also applies to mutual funds so if a fund invests in both taxable and tax-exempt securities, the interest expense must be allocated proportionally based on the income in the fund.

Because expenses allocated to tax-exempt securities are not deductible, the allocation of expenses to tax-exempt income should be minimized.  While it is common to allocate investment expenses to taxable and non-taxable income based on the amount of income in each category, allocating the interest expense in a different manner (such as the number of transactions or the amount of time spent on each class of income) may provide larger allocations to taxable income and therefore increase the amount of deductible investment interest expense.

Example:  Danny manages his own investments.  He trades very frequently, but hasn’t been successful this year.  His taxable investment income is $5,000 and his tax-exempt investment income is also $5,000.  If he allocated investment interest expense based on the relative amount of income from each class, only half of his investment interest expense would be deductible.  However, if 90% of his time in his investment activities is managing his taxable investments and 10% of his time is spent managing his tax-exempt investments, then he has a strong case that 90% of his investment interest should be deductible.

Taxpayers who receive tax exempt income must submit with their returns an itemized statement showing the amount of each class of exempt income and the expenses allocated to each class.  If an item is allocated between tax-exempt and taxable income, the basis of the allocation must be shown on the statement.

To see how this applies to you, give us a call at 248-538-5331.

freeconsultation

Buzzkill Disclaimer:  This post contains general tax information that may or may not apply in your specific tax situation. Please consult a tax professional before relying on any information contained in this post.

Tax Scammers Sending Affordable Care Act Penalty Notices

Share This:

aca-scamTax scammers are at it again.  The IRS has just issued an alert to taxpayers to be on guard against fake emails containing a fraudulent IRS tax bill related to the Affordable Care Act.  The fraudulent tax bill uses the same formatting and very similar language to the actual IRS Form CP2000.

The Real Form 2000CP

The IRS sends Form 2000CP when income reported from third-party sources (such as an employer) does not match the income reported by the taxpayer on his return.  The form provides instructions to taxpayers about what to do if they agree or disagree with the proposed additional tax.  If the taxpayer will send payment, the form instructs that payment be made out to “United States Treasury.”  The Form 2000CP is mailed to taxpayers—it is never emailed.

The Fake Form 2000CP

The IRS has received numerous reports of a fake Form 2000CP being emailed to taxpayers around the country.  The fake forms have the following characteristics:

  • An email that contains the fake CP2000 as an attachment
  • The notice appears to be issued from Austin, Texas
  • The underreported issue is related to the Affordable Care Act requesting information regarding 2014 coverage
  • The payment voucher lists the letter number as 105C
  • The notice includes a payment request that taxpayers mail a check made out to “I.R.S.” to the “Austin Processing Center” at a PO Box. This is in addition to a payment link within the email itself.

The American Institute of Tax Problem Solvers (of which we are members) obtained a copy of the fake tax notice.  It can be viewed here.

What to Do if You Receive a Fake Notice

Taxpayers who receive this scam email should not open the attachment, but forward it to phishing@irs.gov and then delete it from their email account.  Taxpayers should be wary of any unsolicited email purported to be from the IRS.  They should never open an attachment or click on a link within an email sent by an unknown source.

 

freeconsultation

Buzzkill Disclaimer:  This post contains general tax information that may or may not apply in your specific tax situation. Please consult a tax professional before relying on any information contained in this post.

 

Tax Credits for Energy-Efficient Homes

Share This:

energy-tax-creditOver the past several years, Congress has provided taxpayers with a nonrefundable tax credit for energy efficient home improvements.  These tax credits were scheduled to expire in the past, but Congress continues to extend them.  Once again, these credits have been extended through 2016.  This post is a summary of the current rules regarding these credits.

The Credit for Nonbusiness Energy Property

Individuals can claim a nonrefundable tax credit for certain expenditures during 2016 to increase the energy efficiency of their primary residences (not for vacation or second homes) in the United States.

The credit equals the sum of:

  • 10% of certain costs for property installed during the year to improve the energy efficiency of existing homes (these costs are referred to as building envelope components)
  • amounts paid for residential qualified energy property expenditures

Building envelope components are:

  • insulation systems that reduce heat gain/loss
  • exterior windows (including skylights)
  • exterior doors
  • certain metal and asphalt roofs designed to reduce heat gain

For building envelope components, the credit is allowed only for amounts paid to purchase the components.  The credit is not available for amounts paid for onsite preparation, assembly, or original installation of the component.  The component must meet or exceed certain energy efficiency criteria (the manufacturer will certify whether a component meets the criteria).

Qualified energy property is property that meets certain energy efficiency criteria (once again, the manufacturer will certify whether a product meets the criteria).  The credit equals 100% of the cost of the property (up to the limits below).  Qualified energy property includes:

  • electric heat pump water heaters (up to $300)
  • electric heat pumps (up to $300)
  • biomass fuel stoves (up to $300)
  • high-efficiency central air conditioners (up to $300)
  • natural gas, propane, or oil water heaters (up to $300)
  • natural gas, propane, or oil furnaces or hot water boilers (up to $150)
  • advanced circulating air fans (credit limited to $50)

For qualified energy property, the credit is available for amounts paid to purchase the property as well as for costs for onsite preparation, assembly, or original installation.

For building envelope components and qualified energy property, there is a taxpayer lifetime tax credit limit of $500 ($200 for exterior windows and skylights), taking into account all such credits allowed to the taxpayer after 2005.

The Credit for Residential Energy Efficiency Property

This is an entirely separate tax credit and is generally available for installation of alternative energy equipment through at least 2016.  Taxpayers can claim a tax credit for 30% of the cost of eligible solar water heaters, solar electricity property, fuel cell property, small wind energy property, and geothermal heat pump property.  The 2016 Consolidated Appropriations Act extends the Residential Energy Efficient Property credit for five years so it applies to property placed in service through 2021, but ONLY for qualified solar electric property expenditures and qualified solar water heating property expenditures.  The credit will decrease to 26% for 2020 and 22% for 2021 (down from the current 30%).

Expenditures for labor costs for onsite preparation, preparation, assembly, or original installation of qualified property and for piping or wiring to interconnect such property to the dwelling unit also qualify for the credit.

The principal residence requirement does not exist for qualified solar water heating, solar electric, small wind energy, or geothermal heat pump expenditures.

To see how this applies to you, give us a call at 248-538-5331.

freeconsultation

Buzzkill Disclaimer:  This post contains general tax information that may or may not apply in your specific tax situation. Please consult a tax professional before relying on any information contained in this post.

1 2 3 16
Get Our Posts by Email


Created by Webfish.