Home Energy Tax Credits: Going Green for More Green

Inflation Reduction Act

The Inflation Reduction Act offers the potential to save when you make energy-efficient upgrades to your home. Eligible improvements include features such as heat pumps, solar panels, and energy-efficient heating or cooling systems. In turn, with these credits, you could possibly save thousands of dollars.

Where does the Inflation Reduction Act stem from?

It’s part of the climate and tax laws designed to lower gas emissions that are actively heating up the planet and contributing to global warming. The law focuses on the major contributing factors of these gas emissions by prioritizing energy-efficient decisions. Plus, the goal is to lower how much it costs to make environmentally friendly decisions, as these tax credits offset some expenses.

When you make environmentally conscious renovations to your home in ways that save energy, you might qualify for a tax credit. Similarly, if you take measures to adjust your home so that the heating and cooling systems are more efficient, then that same tax credit could provide you with up to $3,200 within the same year of making said improvements.

What are qualified expenses with the Home Energy Tax Credits?

When you qualify for the Home Energy Tax Credit, you can expect a return of 30% of your expenses for the following:

  • Exterior doors, windows and skylights.
  • Insulation and air-sealing materials or systems.
  • Central air conditioners.
  • Natural gas, propane or oil water heaters.
  • Natural gas, propane or oil furnaces, and hot water boilers.
  • Heat pumps.
  • Water heaters.
  • Biomass stoves and boilers.
  • Home energy audits of your primary residence.

What is the maximum credit that you can claim per year?

The maximum amount of money you can claim in the form of the Home Energy Tax Credit is equal to $1,200 for costs associated with energy improvements on your property. There are limitations when it comes to doors, as each door amounts to $250 per door, up to $500 total. Windows are equal to $600, while home energy audits equate to $150.

Furthermore, you may receive $2,000 per year in exchange for the purchase of qualified heat pumps, biomass stoves or biomass boilers. The credit applies to existing homes, additions, renovations and newly constructed homes. It is nonrefundable, meaning it cannot exceed the taxes owed.

Excess credit cannot be carried forward either. Energy improvements to your primary home may qualify for an annual tax credit, and you might also be eligible for the credit on improvements made to a second home as long as the home is not rented out to tenants.

The credit can cover 30% of qualifying purchases, including permits and inspections. Also, note that the credit may gradually decrease to 26% in 2032 and 22% in 2034.

From there, the credit is set to phase out in 2035. Remember that the credit is equivalent to 30% of the costs for new clean energy features that are installed in U.S. homes between 2022 and 2033.

What counts as qualified expenses in terms of the Home Energy Tax Credits?

Here are expenses that qualify for the tax credits:

  • Solar electric panels.
  • Solar water heaters.
  • Wind turbines.
  • Geothermal heat pumps.
  • Fuel cells.
  • Battery storage technology.

What standards must energy equipment meet in order to qualify?

Solar water heaters need a Solar Rating Certification Corp. certification. If not that, then an endorsement from a comparable entity in the applicable state works as well. A geothermal heat pump is required to meet Energy Star requirements in effect when you purchase it. Battery storage technology requires a capacity of no less than three kilowatt hours.

Ultimately, what is the goal of the Inflation Reduction Act?

The Inflation Reduction Act is designed to combat climate change by extending expired and reduced tax provisions alike. These extensions are intended to offer greater financial benefits to those who actively contribute to environmental conservation efforts.

That’s because energy tax credits directly reduce the costs of being environmentally friendly, which incentivizes people to participate in the program for the sake of the savings. By investing in these priorities, individuals can save money while reducing their environmental impact.

To claim the credit, taxpayers should fill out Form 5695 Residential Energy Credits. The best time to do this is when you are filling out your tax return. Last but not least, don’t forget to claim the tax credit for the tax year when the efficient properties were installed.

Need Help with Your Home Energy Tax Credits?

Please give us a call in the coming weeks to discuss these ideas and others that may apply to your situation. At Layton Layton & Tobler we help our clients plan ahead so they won’t be caught unawares. Contact us today to schedule a consultation. We can also help you with payroll preparation and auditing.

Help Understanding Your Home Energy Tax Credits in Las Vegas, Summerlin & Henderson 

Serving Las Vegas, Summerlin & Henderson

Posted on October 10, 2023 | Published by Ignite Local | Related Local Business

What Doesn’t Your Credit Score Take Into Account?

credit score

FICO credit scores range from 300 to 850, with most lenders considering a credit score of 800 or higher to be excellent.

What Makes Your FICO Score Fall?

The most important factor in determining your credit score is your payment history. Certain monthly payments — such as those for your mortgage; auto, student or personal loans; and your credit card payments — are reported to the three national credit bureaus of TransUnion, Experian and Equifax. If you make these payments on time, your score will steadily rise. But if you make even one of these payments 30 days or longer past your due date, your FICO score could fall by 100 points or more.

Your FICO score also varies depending on how much of your available credit you are using, the age of your credit accounts and the number of new credit accounts you open.

To build a strong credit score, you must make your monthly payments on time, pay off your credit card debt and keep old credit card accounts open, even if you don’t plan on using them again.

What’s not included in your credit score?

But what doesn’t impact your credit score? Quite a bit, including some financial factors that might surprise you.

Your income doesn’t matter. Earning more money will not improve your credit score. Your credit score won’t budge depending on your employment status. Losing your job won’t ding your three-digit score.

Your age has no impact on your credit score, either, and your score won’t rise or fall as you get older.

And certain payments don’t impact your score. That’s because many of your regular payments aren’t reported to the credit bureaus. Even if you pay your utility bill, cable bill or cellphone bill on time each month, your credit score won’t get a boost. These payments aren’t tracked by Experian, Equifax or TransUnion.

Also, medical bills don’t hurt or help your credit score. If you pay your doctor’s bill on time, your score won’t rise. If you pay for it late, it won’t fall. Be careful, though: If you don’t pay your medical bills and your health care provider sends your account to collection, that will hurt your credit score.

If you rent an apartment or house, paying your landlord on time doesn’t help your credit score in most cases. This is slowly starting to change as advocates for renters argue that paying rent on time each month should boost a credit score.

The credit bureaus are now accepting reports of on-time rent payments from landlords who submit them. And if your landlord does submit a record of your payments, it could help your credit score. The problem? Most landlords don’t participate in these rent-reporting programs, so most renters still don’t benefit from their on-time payments.

The key to a good credit score? Paying your bills on time

The most crucial step to building a good credit score remains simple: Pay your bills on time each month and keep your credit card debt low. If you do these two things, your score will steadily improve or remain high, no matter what else is or isn’t included in your FICO score.

Need Help with Your FICO Score in Las Vegas?

Please give us a call in the coming weeks to discuss these ideas and others that may apply to your situation. At Layton Layton & Tobler we help our clients plan ahead so they won’t be caught unawares. Contact us today to schedule a consultation. We can also help you with payroll preparation and auditing.

Help Understanding Your Credit Score in Las Vegas, Summerlin & Henderson 

Serving Las Vegas, Summerlin & Henderson

Posted on September 14, 2023 | Published by Ignite Local | Related Local Business

How Do You Claim the Mortgage Interest Tax Deduction?

Mortgage-Interest-Deduction-las vegasWhen you make your mortgage payment each month, a portion of your dollars will go toward paying down your loan’s principal balance. But a good chunk of your payment will also go toward paying the interest your loan accrues. We’ll discuss the mortgage interest deduction, a method of recouping this interest payment.

During the earlier days of your mortgage, more of your payment will go toward interest and less will go toward paying down your loan’s balance.

The good news is that you can deduct from your taxes the interest you pay on the first $750,000 of mortgage debt. And if you bought your home before Dec. 16, 2017, you can deduct the interest you pay on the first $1 million of your mortgage debt.

How much will this deduction save you?

How much you save because of the mortgage interest deduction depends on the interest rate attached to your loan, your loan’s term and the size of your loan. It also depends on the age of your loan: You’ll pay less interest the longer you hold on to your loan. With a standard fixed-rate mortgage, you’ll save less on this deduction every year.

Say you take out a 30-year fixed-rate mortgage of $350,000 with an interest rate of 6.5%. During the first year of paying off this mortgage, the interest deduction would save you $8,102 on your taxes.

Your tax savings will fall after this first year. During the 30 years of your loan, your average tax savings would be $4,649 a year.

Is it worth claiming the mortgage interest deduction?

You can only claim this deduction if you itemize on your taxes. This means that you’ll need to determine whether you’ll save more money by itemizing your taxes or by claiming the standard deduction.

For 2023, the standard income tax deduction will rise to $13,850 for single filers and those married who are filing separately. It will increase to $27,700 for joint filers and $20,800 for those filing as head of household.

It only makes sense to itemize on your income taxes if your itemized deductions will equal more than your standard deduction. This might be the case if you run your own business, own rental real estate or are paid as a consultant. But if you are a salaried employee, the odds are high that the standard deduction will net you more money back on your taxes than itemizing your taxes will, even with the mortgage interest deduction.

If you do take the standard deduction, you can’t also deduct the interest you paid on your mortgage during the year.

How do you claim the mortgage interest deduction?

If you do itemize deductions, claiming your mortgage interest deduction is a simple process.

Your lender will send you a Form 1098 in January or early February. This form lists how much you paid in mortgage interest during the year. You’ll get this form if you pay more than $600 in mortgage interest during the year.

The form will list the mortgage interest you paid in Box 1. You’ll enter that figure on Schedule A of Form 1040.

Of course, the numbers tend to change every year and your particular situation may be different. Be sure to work with a financial professional to make sure you are aligned with the latest limits and rules.

Have questions about the this or other tax issues?

Please give us a call in the coming weeks to discuss these ideas and others that may apply to your situation. At Layton Layton & Tobler we help our clients plan ahead so they won’t be caught unawares. Contact us today to schedule a consultation. We can also help you with payroll preparation and auditing.

Help with Mortgage Tax Deduction Questions in Las Vegas 

Serving Las Vegas, Summerlin & Henderson

Posted on August 26, 2023 | Published by Ignite Local | Related Local Business