Cut your Tax Bill with Home Energy Credits

Did you know that it’s possible to trim your tax bill and save on your energy bills with certain home improvements? Here are some key facts you should know about home energy tax credits:

Non-Business Energy Property Credit

• Part of this credit is worth 10 percent of the cost of certain qualified energy-saving items you added to your main home last year. This may include items such as insulation, windows, doors and roofs.
• The other part of the credit is not a percentage of the cost. It is for the actual cost of certain property. This may include items like water heaters and heating and air conditioning systems. The credit amount for each type of property has a different dollar limit.
• This credit has a maximum lifetime limit of $500. You may only use $200 of this limit for windows.
• Your main home must be located in the U.S. to qualify for the credit.
• Be sure you have the written certification from the manufacturer that their product qualifies for this tax credit. It is usually posted on the manufacturer’s website or included with the product’s packaging. You can use this information to claim the credit, but do not attach it to your return. Keep it with your tax records.
• You may claim the credit on your 2015 tax return as long as you haven’t exceeded the lifetime limit in past years. Under current law, this credit is available through Dec. 31, 2016.

Residential Energy Efficient Property Credit

• This tax credit is 30 percent of the cost of alternative energy equipment installed on or in your home.
• Qualified equipment includes solar hot water heaters, solar electric equipment, wind turbines and fuel cell property.
• There is no dollar limit on the credit for most types of property. If your credit is more than the tax you owe, you can carry forward the unused portion of this credit to next year’s tax return.
• The home must be in the U.S. It does not have to be your main home unless the alternative energy equipment is qualified fuel cell property.
• This credit is available through 2016.

To claim these credits use Form 5695, Residential Energy Credits. If you would like more information on this topic, don’t hesitate to contact the office.

Parents: Don’t Miss Out on These Tax Savers

If you have children, you may be able to reduce the amount of taxes owed for the year using tax credits and deductions. Here are several tax benefits you might be able to take advantage of when you file your federal tax return:

• Dependents. In most cases, you can claim your child as a dependent. You can deduct $4,000 for each dependent you are entitled to claim. You must reduce this amount if your income is above certain limits.
• Child Tax Credit. You may be able to claim the Child Tax Credit for each of your qualifying children under the age of 17. The maximum credit is $1,000 per child. If you get less than the full amount of the credit, you may be eligible for the Additional Child Tax Credit.
• Child and Dependent Care Credit. You may be able to claim this credit if you paid for the care of one or more qualifying persons. Dependent children under age 13 are among those who qualify. You must have paid for care so that you could work or look for work.
• Earned Income Tax Credit. You may qualify for EITC if you worked but earned less than $53,267 last year. You can get up to $6,242 in EITC. You may qualify for the EITC with or without children.
• Adoption Credit. You may be able to claim a tax credit for certain costs you paid to adopt a child.
• Education Tax Credits. An education credit can help you with the cost of higher education. Two credits are available–The American Opportunity Tax Credit and the Lifetime Learning Credit–and they may reduce the amount of tax you owe. If the credit reduces your tax to less than zero, you may get a refund. Even if you don’t owe any taxes, you still may qualify; however, you must complete Form 8863, Education Credits, and file a return to claim these credits.
• Student Loan Interest. You may be able to deduct interest you paid on a qualified student loan. You can claim this benefit even if you do not itemize your deductions.
• Self-employed Health Insurance Deduction. If you were self-employed and paid for health insurance, you may be able to deduct premiums you paid during the year. This may include the cost to cover your children under age 27, even if they are not your dependent. Please call the office for additional details.

Do not hesitate to contact the office if you have any questions about these and any other tax credits and deductions that you are entitled to under federal and state tax codes.

Ten Facts About Capital Gains and Losses

Did you know that almost everything you own and use for personal or investment purposes is a capital asset? Capital assets include a home, household furnishings, and stocks and bonds held in a personal account.

When you sell a capital asset, the difference between the amount you paid for the asset and its sales price is known as a capital gain or capital loss. Here are ten facts you should know about how gains and losses can affect your federal income tax return. Read more

What Income is Taxable?

Are you wondering if there’s a hard and fast rule about what income is taxable and what income is not taxable? The quick answer is that all income is taxable unless the law specifically excludes it. But as you might have guessed, there’s more to it than that.

Taxable income includes any money you receive, such as wages and tips, but it can also include non-cash income from property or services. For example, both parties in a barter exchange must include the fair market value of goods or services received as income on their tax return. Read more

Estimated Tax Payments: Q&A

Estimated tax is the method used to pay tax on income that is not subject to withholding. This includes income from self-employment, interest, dividends, alimony, rent, gains from the sale of assets, prizes and awards. You also may have to pay estimated tax if the amount of income tax being withheld from your salary, pension, or other income is not enough. If you do not pay enough by the due date of each payment period you may be charged a penalty even if you are due a refund when you file your tax return.

How do I know if I need to file quarterly individual estimated tax payments?

If you owed additional tax for the prior tax year, you may have to make estimated tax payments for the current tax year. The first estimated payment for 2016 is due April 18, 2016.

If you are filing as a sole proprietor, partner, S corporation shareholder, and/or a self-employed individual, you generally have to make estimated tax payments if you expect to owe tax of $1,000 or more when you file your return.

If you are filing as a corporation you generally have to make estimated tax payments for your corporation if you expect it to owe tax of $500 or more when you file its return.

If you had a tax liability for the prior year, you may have to pay estimated tax for the current year; however, if you receive salaries and wages, you can avoid having to pay estimated tax by asking your employer to withhold more tax from your earnings.

Note: There are special rules for farmers, fishermen, certain household employers, and certain higher taxpayers.

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