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credit for solar installations and such
There’s a new tax credit that you may find useful if you’re a home-owner who will be trying to get under the tax line :
The law both increases tax credits for commercial solar installations and offers individual homeowners a credit for the first time in 20 years.
(An earlier personal-use solar credit was in effect .)
Interested in claiming a credit?
Act fast.
To hold down the projected cost, Congress authorized the solar credits for only two years — .…
Homeowners… can put in a photovoltaic system (roof panels that take in energy from the sun and turn it into electricity) and/or a solar-powered hot water system (for hot water heaters, radiant floors or radiators), and get a federal tax credit worth 30% of the systems’ cost, up to a credit of $2,000 per system.
There are a couple of catches: The heating system can’t be for a pool or hot tub, and the federal credit applies to the net system cost after any state incentives.
The good part is that this new federal break is a credit — not a deduction — meaning it reduces your tax bill directly, dollar for dollar.
So, if you install both eligible solar systems in your house, you can knock $4,000 off your federal tax bill.
And if you have more credit than you owe in tax, you can carry it over and use it to defray next year’s federal tax bill.
There are some new tax credits coming — one set of credits for various types of more fuel-efficient motor vehicles, and another set for energy-saving home improvements (from reflective roofs to insulation to more efficient water heaters and furnaces to solar cells and solar water heaters).
If you think you’ll have a hard time getting under the tax line , you may want to look into this.
$15,000 extra taxable income can suddenly become untaxable if you get a $2,000 tax credit for buying $6,750 worth of home solar power — and then your electricity bill will go down too!
may be a very good one for those of us practicing the DON method of tax resistance.
For one thing, the Senate is currently trying to make it easier for those of us who don’t itemize to take deductions for giving money to charity (I’ll go into this in more detail if it actually becomes law).
But , I’ll pass along some more details about the new “green” tax credits you can start taking advantage of .
Jeremy Faludi at WorldChanging describes these new tax breaks:
Solar tax credits, for instance, are at an all-time high for the IRS.
You can deduct 30% of the cost of a residential solar installation (capped at $2,000).
This includes not just photovoltaics, but solar water heaters (which are much more affordable and quite underused), solar hybrid lighting, and concentrating solar power.
You get a 30% credit for fuel cell installation, too (up to $1000 per kW).
There are also a slew of deductions for installing better windows, roof, and heating / AC system in your home; some of them credit you 10% of the purchase price, others are fixed dollar amounts.
…And notice that these aren’t tax deductions, they’re tax credits — meaning the money comes straight off your tax burden, it’s not merely used to recalculate your tax.… In addition, many of these credits can be used twice, both by the end-user of the home or office as well as the company installing them.
This is the first time individual homeowners have gotten tax breaks for efficiency and green power in 20 years — ever since Jimmy Carter’s energy bill, they’ve been commercial only.…
And these are just the federal tax breaks.
Many states and local utilities or municipalities have their own incentives.
For further info on state and local tax breaks, check out the Database of State Incentives for Renewable Energy (DSIRE).
If you want a real-world example of how much money you could save on a project, the San Diego Regional Energy Office has a report on a PV solar installation (a big one — 30kW) that cost less than 30% of its sticker price due to all the credits and incentives.
And that was when the federal credit for solar was 10%, not 30% like it is now.
Forbes also has some good back-of-the-envelope numbers on what you as a homeowner might save for different situations.
A $2,000 tax credit corresponds to something on the order of $24,000 in “adjusted gross income” you can earn tax-free.
Last year, I brought in about $23,000, and my adjusted gross income was about $14,000. This year, if I spend $6,700 on some sort of home solar set-up, I could earn an additional $10,000 (which would bring my adjusted gross income up to $24,000), and end up with a nice solar system.
(I’d forfeit most of my Retirement Savings Tax Credit, but I wouldn’t need it.)
Of course, if I earn an additional $10,000, I pay an additional $1,530 in FICA, which may make the whole thing not worth it from a tax-resister’s perspective*, but the prospect of having a nice solar set-up and another $1,750 or so in spending money is pretty appealing.
*
FICA, otherwise known as the “payroll” or “social security” tax, is much harder to legally avoid than is the federal income tax, and this presents a problem for tax resisters like me.
I’ve discussed aspects of this problem in greater detail in previous Picket Line entries, for instance: , , , , , and .
The Treasury Department and the IRS today have issued guidance (Notice 2006-26) on the certification that homeowners may rely on when they claim credits for purchases that make their homes more efficient.
During , individuals can make energy-conscious purchases that will provide tax benefits when filling out their tax returns .
The credit will also be available for purchases in .
Manufacturers offering energy efficient items such as insulation or storm windows can assure their customers that their energy efficient items will qualify for the tax credit if certain energy efficiency requirements are met.
A recent tax law change provides a tax credit to improve the energy efficiency of existing homes.
The law provides a 10 percent credit for buying qualified energy efficiency improvements.
To qualify, a component must meet or exceed the criteria established by the International Energy Conservation Code (including supplements) and must be installed in the taxpayer’s main home in the United States.
The following items are eligible:
Insulation systems that reduce heat loss/gain
Exterior windows (including skylights)
Exterior doors
Metal roofs (meeting applicable Energy Star requirements).
In addition, the law provides a credit for costs relating to residential energy property expenses.
To qualify as residential energy property, the property must meet certification requirements prescribed by the Secretary of the Treasury and must be installed in the taxpayer’s main home in the United States.
The following items are eligible:
$50 for each advanced main air circulating fan
$150 for each qualified natural gas, propane, or oil furnace or hot water heater
$300 for each item of qualified energy efficient property.
The maximum credit for all taxable years is $500 — no more than $200 of the credit can be attributable to expenses for windows.
Additionally, the new law makes a credit available to those who add qualified solar panels, solar water heating equipment, or a fuel cell power plant to their homes in the United States.
In general, a qualified fuel cell power plant converts a fuel into electricity using electrochemical means, has an electricity-only generation efficiency of more than 30 percent and generates at least 0.5 kilowatts of electricity.
Taxpayers are allowed one credit equal to 30 percent of the qualified investment in a solar panel up to a maximum credit of $2,000, and another equivalent credit for investing in a solar water heating system.
No part of either system can be used to heat a pool or hot tub.
Additionally, taxpayers are also allowed a 30 percent tax credit for the purchase of qualified fuel cell power plants.
The credit may not exceed $500 for each .5 kilowatt of capacity.
These items must be placed in service .
So there it is.
I was disappointed to learn that these credits seem to be only for people who own the residence they live in (“the dwelling unit is owned and used by the taxpayer as the taxpayer’s principal residence”) — in other words, if you rent you’re out of luck.
In “Ghetto Capitalism”, Patrick Radden Keefe reviews Sudhir Venkatesh’s Off the Books and looks at how people who are least able to afford the costs of participating in the government-regulated and -taxed above-ground economy find and invent alternatives in the underground economy.
Kay Bell at Don’t Mess With Taxes has pointers to some useful resources for people who want to take advantage of federal, state, and local tax incentives for energy-efficient and alternative-energy home improvements.
As you may have noticed, Congress has decided to play double-or-nothing with our money in an attempt to get the economy reinflated in time for the next election.
Their recent legislation is a combination of reckless spending of other people’s money and increased tax code complexity, the combination of which, along with eye of newt and toe of bat, will stimulate the economy, or at least so said the Impresss Your Economey With 5t!mu1is emails that have been going around lately.
Some of these tax provisions may be of interest to folks who are using the DON Method of income tax resistance:
For tax years , the bill provides a refundable tax credit of up to $400 for individuals and $800 for families.
This credit is equal to 6.2% of earned income, but phases out for taxpayers with adjusted gross incomes over $75,000 ($150,000 for married couples filing jointly).
This effectively offsets a portion of the payroll tax (or self-employment tax).
If you’re employed, your employer may begin withholding less FICA from your paychecks.
If you’re self-employed, you’ll end up owing less self-employment tax.
Also, if you’re self-employed and you file quarterly estimated tax payments, in the past you’ve had to try to hit the lesser of two target marks: either 90% of whatever you will owe this year, or 100%–110% of whatever you owed last year (depending on your adjusted gross income).
In , things will be a little different: either 90% of what you will owe this year, or 90% of whatever you owed last year.
If you don’t hit the target, you can get hit with a penalty.
If you have three or more qualifying children in your family or if you file jointly, you may find that you receive a larger-than-usual tax credit via the EITC.
Also, the refundable child tax credit will increase for tax years .
There’s already the Hope and the Lifetime Learning credits, at least I don’t remember those going away, but now there’s yet another education tax credit: The “American Opportunity” Education Tax Credit.
This can reduce your tax bill by up to $2,500 for money you spend on college tuition, books, and fees.
Unlike the other credits I mentioned, 40% of this credit is refundable, so the government will reimburse you for some of your college expenses even if you don’t pay any income tax.
Last year, Congress decided to try to reinflate the housing bubble by providing a “credit” to first-time home buyers.
I put “credit” in quotes because it was really an interest-free loan that the home-buyer would have to pay back in installments.
The new bill makes this credit a real credit that the buyer doesn’t have to pay back.
If you buy your first home , Congress might hand you $8,000 of other people’s money in the form of a refundable tax credit to help you out.
You can deduct the state sales tax you pay when you buy a new motor vehicle.
I’m not sure where this deduction applies, but presumably it’s not just an itemized deduction.
The feds won’t tax the first $2,400 of your unemployment benefits .
Expensing and depreciation rules, particularly for small businesses, are liberalized (and some too).
Also, small businesses that lost money can redistribute these losses to offset gains during .
I think this means that you can refile your tax returns for those years and declare additional businesses losses that can offset business gains in those years and thus lower your taxes, enabling you to file for refunds of taxes you paid long ago.
Under current law, businesses can take a tax credit for the expense of purchasing and installing wind energy generators, and individuals can take a similar tax credit for solar water heating, wind energy generating, geothermal heat pump stuff.
The credits are equal to 30% of the expense, but there used to be a ceiling above which the credit couldn’t go.
The new bill eliminates the ceiling, so your credit is only limited by how much tax you owe and how much you spend on this stuff.
The bill also increases the credit percentage and the credit cut-off ceiling for credits for energy-efficiency improvements by homeowners.
The bill also increases the tax credit for the purchase of electric motor vehicles
Your employer can give you a tax-free public transit or parking fee reimbursement of up to $230 per month.
Tax savings for energy-efficient improvements to your home have increased this
year. If you’re an American home-owner, you may want to
review these
tax provisions to see what you can take advantage of.
President Biden has signed into law the new bill that, among other things, gives a large budget boost to the IRS.
The law gives almost $80 billion to the agency, which it is instructed to spend over the next ten years, in addition to its annual budgets.
This amounts to an over 60% increase in the budget for the agency, assuming the annual budget numbers stay the same over that ten-year span.
It remains possible that a future Congress, particularly a Republican-dominated one, will slash the IRS budget to compensate for this extra spending.
But if I had to guess, I’d guess that such a Congress would prefer to spend the extra money that a beefed-up IRS brings in while complaining about how the Democrats have unleashed the IRS, than to actually cut its budget.
My expectation is that we’re stuck with a better-funded IRS for the near future.
The IRS recently released its Strategic Plan for .
I assume that most of it is now obsolete, but it gives some idea of what the agency sees as its priorities.
Treasury Secretary Yellen was anticipating the bill’s passage, and has fired off a memo instructing the agency to quickly (by bureaucratic standards) develop a new plan for spending the additional money.
The agency hopes to use some of the money to hire about 87,000 new employees.
Since the agency currently has something like 83,000 employees, that sounds at first like a pretty big deal.
But about 52,000 of the agency’s current employees will be eligible to retire within the next six years.
So a lot of this new hiring will just be replacements.
Also, I think that “87,000” number comes from a Treasury Department estimate published before inflation and a tight labor market combined to change salary expectations significantly.
My guess is that the actual number of new hires will come in well below that number.
(Republican hyperbole suggests that these 87,000 will be “an army of 87,000 armed IRS agents” doing enforcement and audits, but I see no reason to believe that is the case.
Rather the hires will likely be in a variety of roles throughout the agency.)
The IRS has been tightening its belt for a decade or so now, so much so that it can barely function.
There’s a boatload of deferred maintenance it will have to undergo just to get seaworthy.
Onboarding new employees is a lengthy and cumbersome process for the agency.
So I do not expect much rapid improvement in the agency’s abilities, particularly in enforcement.
We’ll probably begin to soon see evidence that the capabilities collapse of the agency has slowed and halted (there may be somewhat quicker improvements in data entry and what they call “customer service”).
it took the agency to process my tax return, for example, and I’d be surprised if it takes them any longer than that .
Treasury Secretary Yellen has vowed that none of the new spending will be used to increase audits on households making less than $400,000 per year — “relative to historical levels” anyway, which seems to me like it leaves enough wiggle room for a substantial increase, given how audits in all income levels have been falling in the recent “historical” epoch.
(Hint for rich people: If you’re going to cheat on your taxes, make sure you cheat enough to get your declared income under $400,000!)
But for many of us tax resisters, audits aren’t really the sort of enforcement we’re most concerned about anyway.
In my case, for example, the IRS seems to have thrown in the towel, and has been letting my years of unpaid taxes expire due to the statute of limitations without taking any but the most half-hearted measures to collect.
It may be that in a few years, when some of these new hires come up to speed, they’ll begin to take some of these cold cases like mine off the back burner and start trying to collect more earnestly.
I’ve been mostly concentrating on the IRS funding aspects of the new legislation, but there are a few other elements that may be of interest to those of us who use legal tax deductions and tax credits to lower or eliminate our income tax bills.
The legislation extends the more-generous health insurance subsidies of the Affordable Care Act (Obamacare), which were otherwise scheduled to expire, and which are partially-implemented in the form of a tax credit.
There are also new tax credits available to people who spend money on making their homes more energy-efficient or who purchase certain types of clean-fuel vehicles.
In 
