Lower Your Taxes and Heating Bills

Lower Your Taxes and Heating Bills

by | Dec 2, 2009 | Archives

You can weatherize your home and be rewarded for the effort. Homeowners making energy-saving improvements can cut their winter heating bills and lower their 2009 tax bill as well.
The American Recovery and Reinvestment Act (Recovery Act), enacted earlier this year, expanded two home energy tax credits: the nonbusiness energy property credit and the residential energy efficient property credit.

Nonbusiness Energy Property Credit

This credit equals 30 percent of what a homeowner spends on eligible energy-saving improvements, up to a maximum tax credit of $1,500 for the combined 2009 and 2010 tax years. The cost of certain high-efficiency heating and air conditioning systems, water heaters and stoves that burn biomass all qualify, along with labor costs for installing these items. In addition, the cost of energy-efficient windows and skylights, energy-efficient doors, qualifying insulation and certain roofs also qualify for the credit, though the cost of installing these items does not count.

By spending as little as $5,000 before the end of the year on eligible energy-saving improvements, a homeowner can save as much as $1,500 on his or her 2009 federal income tax return. Due to limits based on tax liability, other credits claimed by a particular taxpayer and other factors, actual tax savings will vary. These tax savings are on top of any energy savings that may result.

Residential Energy Efficient Property Credit

Homeowners going green should also check out a second tax credit designed to spur investment in alternative energy equipment. The residential energy efficient property credit, equals 30 percent of what a homeowner spends on qualifying property such as solar electric systems, solar hot water heaters, geothermal heat pumps, wind turbines, and fuel cell property. Generally, labor costs are included when calculating this credit. Also, no cap exists on the amount of credit available except in the case of fuel cell property.

Not all energy-efficient improvements qualify for these tax credits. For that reason, homeowners should check the manufacturer’s tax credit certification statement before purchasing or installing any of these improvements. The certification statement can usually be found on the manufacturer’s website or with the product packaging. Normally, a homeowner can rely on this certification. The IRS cautions that the manufacturer’s certification is different from the Department of Energy’s Energy Star label, and not all Energy Star labeled products qualify for the tax credits.

Eligible homeowners can claim both of these credits when they file their 2009 federal income tax return. Because these are credits, not deductions, they increase a taxpayer’s refund or reduce the tax he or she owes. An eligible taxpayer can claim these credits, regardless of whether he or she itemizes deductions on Schedule A. Contact me if you need assistance with either of these credits.
HAPPY THANKSGIVING

HAPPY THANKSGIVING

by | Nov 25, 2009 | Archives

Today, we all move pretty fast and sometimes we rush right by the simple things in life, like thanking our colleagues, customers and friends for all that they do. We’d like to “slow down” for a minute, during a very challenging year, as we approach one of America’s great traditions of “taking stock and giving thanks.” For almost 400 years, our country has celebrated Thanksgiving Day to give thanks for what we have and express gratitude to each other. Your friends at Northeast Financial Strategies want you to know how much your loyalty and friendship are appreciated this year and in all years past. To you and your family, from all of us here at NFS, a very Happy Thanksgiving!

Estimate: Millions Could Owe Taxes Due to Making Work Pay Underwithholding

by | Nov 23, 2009 | Archives

The Treasury Inspector General for Tax Administration estimated in a report released Nov. 16 that more than 15.4 million taxpayers could unexpectedly owe taxes for tax year 2009 as a result of having their taxes underwithheld for the Making Work Pay credit.

The credit, created by the American Recovery and Reinvestment Act of 2009, is in effect for tax years 2009 and 2010. The credit is advanced to taxpayers through their wages by modified income tax withholding tables, TIGTA said. This decreased federal withholding “creates the vulnerability that some taxpayers may have their taxes underwithheld at the end of Tax Years 2009 and 2010,” it said.

TIGTA’s analysis of the new withholding tables and the credit amount taxpayers are supposed to receive identified individuals who would receive more of the credit than they were entitled to get, TIGTA said. The modifications to the withholding tables do not take into account situations such as:

• dependents who receive wages,
• single taxpayers holding more than one job,
• taxpayers who receive pension payments, and
• Social Security recipients who receive wages, among others.

More than 1.2 million taxpayers who fall in these categories may have to repay some or all of the tax credit and may be assessed the estimated tax penalty or an increased tax penalty as a result of the credit, TIGTA said.

IRS is going to notify taxpayers that they can request a waiver if they are assessed the penalty or if they believe it will affect them, according to an IRS spokesman, but it is not sure what form such guidance will take.

The full text of the TIGTA report, Millions of Taxpayers May Be Negatively Affected by the Reduced Withholding Associated With the Making Work Pay Credit, No. 2010-41-002, is available at: http://www.treas.gov/tigta/auditreports/2010reports/201041002fr.pdf.