How to Receive Your Home Energy Tax Credits

Each tax credit program has its own eligibility criteria, so it’s crucial to review these requirements carefully. Common eligibility factors include:

  • Type of property (primary residence or second home)
  • Installation dates (some credits may require installations to be completed by a specific deadline)
  • Manufacturer certifications and product specifications
  • Maximum credit amounts

Ensure that you meet all the specific criteria for the tax credits you intend to claim.

Keep Detailed Documentation:

Accurate documentation is essential when applying for home energy tax credits. Keep thorough records of all relevant documents, such as:

  • Invoices and receipts for product purchases and installation costs
  • Manufacturer certifications and product specifications
  • Proof of ENERGY STAR ratings or other energy efficiency qualifications
  • Photos or documentation of the completed upgrades

Having these records on hand will simplify the tax credit application process.

File the Appropriate Tax Forms:

 

Credit: IRS.gov/Phillip Clark

To claim home energy tax credits, you will need to file the necessary tax forms. Typically, you will use IRS Form 5695, Residential Energy Credits, to report your eligible expenses. Be sure to follow the instructions provided with the form and include all required documentation.

Consult with Georgen Scarborough Associates:

Navigating the tax code can be complex, especially when claiming energy-related tax credits. Consulting with Georgen Scarborough Associates who specializes in helping homeowners maximize their tax credits, can help ensure that you follow all the rules and regulations and maximize your tax savings.

Submit Your Tax Return:

Include your completed IRS Form 5695 and all supporting documents when you file your annual tax return. It’s essential to submit your tax return accurately and on time to receive the energy tax credits you’re eligible for.

Conclusion:

Receiving home energy tax credits is a rewarding way to offset the costs of energy-efficient home improvements while contributing to a more sustainable future. By identifying eligible upgrades, researching available tax credits, meeting eligibility requirements, maintaining detailed documentation, and seeking professional guidance when needed, you can successfully navigate the process and enjoy the financial benefits of a greener, more energy-efficient home.

For more information on how to receive credit for your home improvements for 2023 – 2032’s Home Energy Tax Credits, contact Georgen Scarborough Associates at (703) 319-3990 or through their website at gsacpa.com.

Source: Energy.gov, IRS.gov

Visit the Energy.gov site for more information:
Making Our Homes More Efficient: Clean Energy Tax Credits for Consumers | Department of Energy

Visit the IRS.gov site for more information:
Home Energy Tax Credits | Internal Revenue Service (irs.gov)

Energy Efficient Home Improvement Credit | Internal Revenue Service (irs.gov)

Frequently asked questions about energy efficient home improvements and residential clean energy property credits — Qualifying Residence | Internal Revenue Service (irs.gov)

2022 Tax Savings Laws

Being aware of tax savings laws passed in 2022 can help you plan for the future and make good financial decisions. Congress passed two laws in 2022 to help create incentives for Americans who are interested in purchasing clean vehicles and making decisions on planning for retirement: The Inflation Reduction Act of 2022 and the SECURE 2.0 Act, respectively. Learn more about your eligibility for tax credits and how you can increase retirement savings here.

The SECURE 2.0 Act

The SECURE 2.0 Act makes notable changes to qualified retirement plans. Here are the key takeaways about the new law from fidelity.com:

  • The age to start taking RMDs increases to age 73 in 2023 and to 75 in 2033.
  • The penalty for failing to take an RMD will decrease to 25% of the RMD amount, from 50% currently, and 10% if corrected in a timely manner for IRAs.
  • Starting in 2024, RMDs will no longer be required from Roth accounts in employer retirement plans.
  • Catch-up contributions will increase in 2025 for 401(k), 403(b), governmental plans, and IRA account holders.
  • Defined contribution retirement plans will be able to add an emergency savings account associated with a Roth account.

Managing your finances responsibly helps you maintain a good state of mind. It is a good idea to consult your financial advisor or tax professional to get the best advice on how to make the most of your financial situation by learning how the most recent changes in tax law can be beneficial for you. To read more about the specifics of the SECURE 2.0 law, visit: https://www.fidelity.com/learning-center/personal-finance/secure-act-2

Tax Credits and Incentives for Energy Efficiency

The Inflation Reduction Act of 2022 offers new federal income tax credits applied retroactively through 12/31/2022. And updates will be applied for 2023 and remain effective through 12/31/2032. Its savings for homeowners can provide up to $3,200 annually to lower the cost of energy-efficient home upgrades by up to 30 percent. It also details savings for home builders and commercial building owners. To see what kinds of green improvements to your home are eligible for tax credits, visit this link: https://www.energystar.gov/about/federal_tax_credits/federal_tax_credit_archives/2022_tax_credit_information

Credits for New Clean Vehicles

You may qualify for a credit of up to $7,500 under Internal Revenue Code Section 30D if you buy a new, qualified plug-in EV or fuel cell electric vehicle (FCV) in 2023 or after. However, there are a number of qualifications that must be met to be eligible. This is in regard to who qualifies and what the criteria of a qualified vehicle are. Visit this link https://www.irs.gov/credits-deductions/credits-for-new-clean-vehicles-purchased-in-2023-or-after to learn more.

To see the list of Qualified Manufacturers of the vehicles currently eligible for a credit, visit this link: https://www.irs.gov/credits-deductions/manufacturers-and-models-for-new-qualified-clean-vehicles-purchased-in-2023-or-after

Georgen Scarborough Associates is committed to staying informed of the most current tax laws to offer its clients the best advice so that they can maximize their tax returns. Please feel free to share this page with anyone you know who can benefit from learning this information.

The Inflation Reduction Act

Inflation Reduction Act Tax News

This information on The Inflation Reduction Act is shared from The Journal of Accountancy article, A deeper dive into the Inflation Reduction Act’s tax provisions

The budget reconciliation bill, P.L. 117-169, known as the Inflation Reduction Act, was signed into law on Aug. 16. It includes numerous tax provisions, including new corporate taxes. It also contains numerous clean-energy-related tax incentives and money for IRS enforcement and other initiatives.

Corporate Alternative Minimum Tax

The new corporate AMT is based on book income rather than taxable income. Specifically, it imposes a 15% tax on the excess of the corporation’s adjusted financial statement income over its corporate AMT foreign tax credit for the year.

Excise Tax on the Repurchase of Corporate Stock

The act introduces a new 1% excise tax on corporate stock repurchases (new Sec. 4501). Covered corporations must pay the tax on the fair market value (FMV) of any stock the corporation repurchases during the tax year.

Clean Energy Provisions for Individuals

The Sec. 25C nonbusiness energy property credit is extended through 2032 and is renamed the energy-efficient home improvement credit. The amount of the 25C credit is changed from a $500 maximum lifetime credit to a credit of up to $1,200 per year.

Clean Vehicle Credits

The act also removes the limitation on the number of vehicles eligible for the credit, so electric vehicles purchased from manufacturers that had formerly reached their cap will now be eligible for the $7,500 credit. It also imposes a new requirement that a percentage of critical minerals used in the car must have been extracted or processed in the United States or in a country with which the United States has a free trade agreement or recycled in North America.

Clean Energy Manufacturing

The act extends the Sec. 48C advanced energy project credit by making allocations for up to $10 billion more in awards for qualified investments, effective Jan. 1, 2023. To encourage the clean production of electricity, the act creates a new credit for the production of electricity at qualified facilities placed in service after Dec. 31, 2024, with a greenhouse gas emissions rate of zero.

Energy Provisions for Businesses

The Sec. 45 credit for electricity produced from certain renewable sources (including geothermal, solar, and wind facilities) is extended through 2024. Sec. 48 is also amended to provide an increase in the energy credit for qualified solar and wind facilities placed in service in connection with low-income communities. The act creates a zero-emission nuclear power production credit and introduces an alternative deduction under Sec. 179D for taxpayers that retrofit property to be more energy efficient.

Treating clean energy tax credits as payments

Under new Sec. 6417, eligible taxpayers can elect to treat a multitude of eligible energy credits as tax payments. These range from alternative fuel refueling property credits to clean electricity investment credits. Under new Sec. 6418, eligible taxpayers generally can transfer these credits (except the qualified commercial vehicle credit) in any tax year to another taxpayer.

To make sure you maximize your refund, consider having your taxes done by a professional tax expert who will know all the relevant tax laws for your situation.

Georgen Scarborough Associates provides tax preparation services. If you need help or advice filing your tax return and reaping the benefits of the latest tax laws, please contact one of our tax preparation experts today.

How to Determine your Estimated Taxes for 2023

How to determine your estimated taxes

Sole proprietors, partners, and S corporation shareholders should make estimated tax payments if they expect to owe $1,000 or more when their return is filed. However, many people are uncertain how to go about figuring out their estimated taxes for a given year, let alone paying them. Here is a simple guide to determining your estimated taxes for 2023.

Estimating tax using Form 1040-ES

Most individuals use Form 1040-ES to determine their estimated taxes. It is a fairly simple calculation, provided you can provide all of the following:

  • Expected adjusted gross income
  • Deductions
  • Taxable income
  • Taxes
  • Credits

You can use your income, deductions, and credits for the prior year as a starting point, referring back to the federal tax return you previously filed.  Form 1040-ES includes a worksheet that you can use to figure out your taxes, based on these amounts. You need to estimate the amount of income you expect to receive for the coming year. If your estimated amounts are too high or too low, you can always complete another Form 1040-ES in the following quarter, adjusting the estimates you previously made. It is best to try to make your estimations as accurate as possible, however, in order to avoid penalties.

C-Corporations can follow a similar procedure, except that they use Form 1120-W. 

If you are not comfortable estimating your taxes and completing your Form 1040-ES, or if you run a business and would like to outsource your accounting and tax functions to qualified, certified accountants, contact Georgen Scarborough. We are a firm of CPA’s in Vienna, VA, and we will be happy to handle your estimated tax calculations.

The Tax Benefits of Homeownership

The Tax Benefits of Homeownership

There are many tax benefits that people who own homes can reap. One of the main tax benefits of homeownership is that they don’t have to count the rental value of their home as taxable income—also called imputed rent. This means that their home can be a source of income that is not taxed. Here are some more tax benefits that homeowners get:

Mortgage Interest Deduction.

Homeowners who itemize deductions can reduce their taxable income by deducting the interest they pay on a home mortgage. Taxpayers who don’t own homes don’t have this benefit. This tax break was further defined by the Tax Cuts and Jobs Act. 

Property Tax Deduction.

These homeowners can also reduce their taxable income when they deduct their property taxes, as this will effectively be a transfer of federal funds to jurisdictions that impose a property tax, which lets them raise property tax revenue at a lower cost to their constituents. 

Profits From Home Sales.

Generally speaking, when a taxpayer sells an asset, they must pay capital gains tax on any profits, but homeowners may exclude from taxable income up to $250,000 (or $500,000 for joint filers.) if they meet the criteria as follows:

  • They must have owned and occupied the home for 2 years of the preceding 5 years as a primary residence.
  • They may not have claimed the capital gains exclusion in the past two years for the sale of another home, with some exceptions.

These deductions and exclusions are generally worth more to taxpayers in higher tax brackets. Compared to homeowners in lower-income tax brackets, those with higher incomes face higher marginal tax rates and pay more property tax and mortgage interest. This means that they will most likely itemize their tax deductions on their tax returns.

4 Ways a CPA Can Maximize Your Tax Refund

4 Ways a CPA Can Maximize Your Tax Refund

Now that tax season has begun, many people are considering whether or not they should hire a Certified Public Accountant (CPA) to help them get more from their tax returns. And with good reason, CPAs can provide valuable assistance during this time. Here are some ways that a CPA can help you to maximize your tax refund:

Claim Your Credits

Tax credits are a dollar-for-dollar reduction of taxes that you owe. Most people who have a moderate to low income may qualify for the Earned Income Tax Credit. There are some requirements that you must meet to be eligible for this credit, and to get it, you must file a tax return (even if you don’t owe taxes.) While this may seem complicated, a CPA will be able to help you claim these credits.

Determine Whether You Qualify for Deductions

It is vital that you don’t miss any tax deductions, as finding only one missed deduction can make a big difference. In fact, if a CPA can find a large enough deduction, it might just be enough to cover their fee. The more deductions they can find, the higher your return will ultimately be.

Help You File Your Income Taxes

A qualified CPA will be able to help you determine the best filing status. Choosing the best filing status for you can significantly impact how much your refund will be. The status you choose will determine your standard deduction, filing requirements, the credits you qualify for as well as your tax refund. 

Correct Any Errors.

Having a CPA on hand can help you avoid any mistakes or commit unintentional fraud. Besides this, they can also help you create a budget plan if you have unpaid taxes. This will help you work out a payment plan with the IRS for your taxes to save more money. Ultimately, your CPA will be able to keep track of costs and financial planning so that you don’t have to.

For expert, professional assistance with your 2022 tax returns, contact us at Georgen Scarborough Associates, PC, today.

Year-end transactions to boost your tax refund

year-end transactions to boost your tax refund

As the end of the tax year approaches, it is probably time to start thinking about year-end transactions to boost your tax refund. Of course, it is a good idea to manage your income and expenditures throughout the year in such a way as to ensure the best possible tax breaks. However, when you come towards the transition from one year to another, it is important to time your transactions carefully so as to lower your tax bill. Here are some tax refund tips to help you. 

Lower your tax bill with careful timing

It is possible to minimize taxes year-to-year by making certain payments at just the right time. It is important to know when to make payments to increase expenses and tax deductions and push receipts to create income at the end of the tax year. As a rule of thumb, you want to move income into a year of lower taxes and move expenses into a year of higher taxes. 

Timing payments at year-end

The usual strategy for a small business is to lower the current year’s taxes by deferring income and prepaying expenses. However, this may not be the right path for everybody. If you are going to be in a higher tax bracket for the following year, then it might make sense to take the opposite approach. 

Expenses that can lower your tax bill 

If you are looking for some readily available ways to decrease your tax liability for the current year, you can consider making some or all of the following expenditures, which you can deduct against your income taxes.

  • Deductible gifts and donations
  • Purchase assets – you can deduct against the depreciation on these assets
  • Pre-pay some of the next year’s expenses. That way, you can deduct the expense for the current tax year.

You can also delay income to next year so that you are not liable to be taxed on it in the current tax year. This does not mean receiving a check and then only cashing it next year – you have still received that payment. The way to delay income is to hold off on sending bills to clients until the start of the next tax year.

The assistance of an experienced certified public account (CPA) can help you lower your tax liability easily and legally. Georgen Scarborough is a firm of CPAs based in Vienna, Virginia. Contact us if you need tips on year-end transactions to boost your tax refund.

Federal tax outlook for 2021-2022

2-how to keep your tax bill as low as possible

There are a lot of factors affecting the federal tax outlook for 2021-2022: a global pandemic and recession; business closures and job losses; both houses of Congress controlled by the Democrats; and a significant policy shift in the Executive Branch. We can expect some major changes in tax laws, which will affect the finances of all Americans in one way or another.

While Congress and the Biden White House are still in the process of ironing out the details, some general trends are emerging, which will likely characterize the operations of the federal tax system for at least the next four years. Without spending too much time on the details of the laws and regulations, let’s consider what you need to do to lower your tax bill in light of the new fiscal outlook.

Make the most of the standard deductions

While some of the deduction guidelines and limits are set to change, your approach should remain the same: always strive to get the maximum benefit. If your total itemizable deductions are close to your standard deduction amount, consider accelerating any charitable deductions in the current year to exceed the standard deduction. In this way, you will be making payments that will lower this year’s tax bill.

Be mindful of the Biden administration’s proposed changes

President Biden will be introducing a number of changes to the tax laws that are set to favor lower-income earners while placing heavier obligations on the wealthy. Those who earn in excess of $400,000 per year will have to pay more in taxes. Tax breaks on real estate and inheritances will fall away, and more stringent limits will be placed on itemized deductions.

Individuals and families in lower to middle-income brackets will receive a few additional tax breaks. Speak to a certified public accountant about how these will affect your situation and how you can adjust to accommodate the changes, and either soften their impact or make the most of the potential benefits.

A certified public accountant can help you navigate the changes to tax laws, manage your gains and losses and get the most of the deductions and benefits while maintaining 100% compliance with shifting regulations. Contact Georgen Scarborough to see we can assist you with your federal tax outlook for 2021 and 2022.

President Biden’s proposed tax laws – what they mean to you

1-How are President Biden’s tax laws likely to affect you_

How are President Biden’s tax laws likely to affect your finances for the next four years?

When he was on the election trail in 2020, the president made his tax policy quite clear in a series of statements and speeches. Even before he spelled out the specifics, it was apparent which way his administration would go: higher taxes for corporations and the very wealthy and some much-needed relief for everybody else. Now that he is beyond his first 100 days, it is time to look at how these general policy statements will translate into actionable laws and how they will affect you. Here are five of the most important tax plans that the Biden administration has in store:

1. Higher maximum rate

Biden said that he would raise tax rates on all individuals earning more than $400,000 a year. In more concrete terms, the top individual tax rate on ordinary income has increased to 39.6% from the 37% rate that has been in effect since 2017. So, if you fall into that tax bracket, you can expect to pay 2.7% more on your federal taxes.

2. Itemized deductions

The president intends to limit the tax benefit of itemized deductions to 28% for high-income individuals. This means that, if you fall into the 39.6% tax bracket, every dollar of allowable itemized deductions will reduce your tax bill by no more than 28 cents.

3. New credits for home buyers

Eligible first-time homebuyers are set to be entitled to a new refundable tax credit of the lesser of 10% of the purchase price or $15,000. A major plus is that qualified individuals can collect the credit at the time of the purchase of the home, rather than waiting until they file their tax returns.

4. Increased corporate federal income tax

The Tax Cuts and Jobs Act (TCJA) of 2017 reduced the corporate income tax rate from a maximum of 35% to a flat 21%. The Biden administration will not return this rate to its pre-TCJA level, but will raise it to 28%.

5. Increased child and dependent care credits

The Biden tax plan includes provisions to double the minimum refundable child care tax credit from $2,000 to $4,000 for one child. This applies to families earning less than $125,000 a year. Families that earn between $125,000 and $400,000 per year will receive reduced credits.

There are several other tax reforms forthcoming from the Biden administration. To understand how each of them affects you (or doesn’t, as the case may be), you should enlist the help of certified public accounts. Based in Vienna, Virginia, Georgen Scarborough helps individuals, families, estates, and trusts to manage their tax affairs. Contact us for more information on our services and how we can assist you with your taxes in light of President Biden’s new tax laws.