If you purchased energy-saving equipment for your home during 2009, or will during 2010 you may be eligible for a tax credit. The credit is equal to 30% of the cost, usually up to a maximum of a $1,500 credit.
Specifically, there are two separate credits, with the first being the Nonbusiness Energy Property Credit. This credit applies to homeowners who purchase high-efficiency heating and air conditioning systems, water heaters, stoves, and the cost of installation. Additionally, energy-efficient windows, doors, insulation, and roofs may also qualify, but the installation costs don’t count. The credit is equal to 30% of the qualifying cost up to $5,000 for a maximum credit amount of $1,500.
The second credit is the Residential Energy Efficient Property Credit. This credit is for someone who is looking to invest large sums of money to save on energy costs. The credit amount is also equal to 30% of the cost of equipment, but there is usually no limit to the credit amount. Qualifying equipment includes solar hot water heaters, solar electric systems, geothermal heat pumps, and wind turbines.
To determine if the equipment you purchase qualifies for these tax credits, you will first need to check the manufacturer’s tax credit certification statement. Not all energy efficient equipment qualifies, which is why it is important to do your research before making a purchase.
Monday, January 11, 2010
Frequently Asked Questions (and Answers)
I thought that it would be informative to list some of the questions that I have been recently asked, along with the answers. I can only guess about the future of the estate tax for 2010 and beyond, but I will have an answer about this once legislation is actually passed.
Q: What is the IRA contribution limit for 2009 and the due date?
A: The maximum amount is $5,000 with a catch-up contribution of $1,000 for taxpayers over age 50. There may be a limitation of the deductibility of traditional IRA’s if you have a retirement plan at work, and there is an income limitation for the contribution of Roth IRA’s. The due date is 4/15/10 for 2009 contributions.
Q: Is it better to file a separate tax return from my spouse?
A: Also known as “Married Filing Separately,” usually results in a higher amount of taxes being paid, but can be advantageous in certain situations. We always do an analysis to see if this is better for our married clients.
Q: Does an extension also extend the amount of time I have to pay my taxes?
A: An extension only extends the amount of time to file your return, but if you owe taxes, then you will incur penalties and interest.
Q: Do I need to keep receipts for my donations?
A: Yes, you need receipts for all donations, but if the donation was less than $250, a cancelled check is sufficient.
Q: Should I pay my property taxes ahead of time so that I can deduct that payment on my return?
A: It depends on which year you expect to be in a higher tax bracket. You must also take into consideration if you are not subject to the AMT tax, which leads to the next question.
Q: What is the AMT tax?
A: AMT, which stands for “Alternative Minimum Tax” is a tax that parallels the income tax. It was originally design to prevent wealthy individuals from paying zero income taxes. The most common difference between these two taxes is that the AMT does not allow for the deduction of state and local taxes. Taxpayers are responsible for paying whichever tax is greater.
Q: Do I have to make estimated tax payments, and If so, why?
A: Usually self-employed taxpayers, retirees, and anyone who has income from sources that do not have taxes withheld are required to make quarterly estimated tax payments. If you need to make estimated payments and do not, you may be subject to underpayment penalties.
Q: What is the IRA contribution limit for 2009 and the due date?
A: The maximum amount is $5,000 with a catch-up contribution of $1,000 for taxpayers over age 50. There may be a limitation of the deductibility of traditional IRA’s if you have a retirement plan at work, and there is an income limitation for the contribution of Roth IRA’s. The due date is 4/15/10 for 2009 contributions.
Q: Is it better to file a separate tax return from my spouse?
A: Also known as “Married Filing Separately,” usually results in a higher amount of taxes being paid, but can be advantageous in certain situations. We always do an analysis to see if this is better for our married clients.
Q: Does an extension also extend the amount of time I have to pay my taxes?
A: An extension only extends the amount of time to file your return, but if you owe taxes, then you will incur penalties and interest.
Q: Do I need to keep receipts for my donations?
A: Yes, you need receipts for all donations, but if the donation was less than $250, a cancelled check is sufficient.
Q: Should I pay my property taxes ahead of time so that I can deduct that payment on my return?
A: It depends on which year you expect to be in a higher tax bracket. You must also take into consideration if you are not subject to the AMT tax, which leads to the next question.
Q: What is the AMT tax?
A: AMT, which stands for “Alternative Minimum Tax” is a tax that parallels the income tax. It was originally design to prevent wealthy individuals from paying zero income taxes. The most common difference between these two taxes is that the AMT does not allow for the deduction of state and local taxes. Taxpayers are responsible for paying whichever tax is greater.
Q: Do I have to make estimated tax payments, and If so, why?
A: Usually self-employed taxpayers, retirees, and anyone who has income from sources that do not have taxes withheld are required to make quarterly estimated tax payments. If you need to make estimated payments and do not, you may be subject to underpayment penalties.
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