Solar Tax Panel Credits by Paul Davis
How Much Tax Money Can You Earn from Your Solar Panels?
You may have seen the Tik-Tok videos describing how you can earn money on your taxes if you install solar panels. And now that it is tax season, you want to earn all that money from the Federal Government’s green energy investment incentives.
But what do these tax credits actually offer?
You can read more in detail about the solar tax credits at Energy.Gov. For this article, we are going to look at several frequent misconceptions about these tax credits.
Misconception #1: You can earn more from solar tax credits than you pay in taxes, making a net positive income for installing solar panels.
Truth: These tax credits are non-refundable which reduces the amount you owe and doesn’t give you an income above and beyond what you paid. In this way it is different from the Earned Income Tax Credit and the Child Tax Credit, where you earn the credit even if you have no tax liability.
Misconception #2: I have to own my home to qualify.
Truth: You have to have some ownership in the solar power system, not necessarily in your house. The Department of Energy article mentions members of cooperative housing or condominiums who can be eligible for their costs associated with community solar. If you have costs associated with a solar installation, come talk to one of our tax preparers to see if your costs will qualify.
Misconception #3: I can add tax credits and rebates to equal 100% of my solar costs.
Truth: Any utility rebates must be subtracted from your total costs before you claim your federal tax credit. However, state tax credits will not be deducted from your federal tax credit but they will increase your claimed income.
Misconception #4: Credits and payments from local utilities will cover the cost of financing.
Truth: If something sounds too good to be true, it is. When someone sells you financing on solar panels saying that they will pay for themselves, you need to talk to an accountant or tax professional who has a fiduciary commitment to you as their customer not to the solar panel manufacturer. There are always costs: do those costs make sense for your situation? Don’t expect a salesperson whose next meal depends on you purchasing to correctly analyze your situation.
Can I Claim Solar Panel Costs From Last Year or a Previous Year?
Each person’s financial situation is unique, and if you are thinking about claiming solar or other green energy costs you should make an appointment to speak with Danielle or Melynda about your unique situation.
Dirty Dozen Tax Scams, Part 2
The IRS has completed their Dirty Dozen tax scam series, warning individuals and businesses about popular schemes and scams targeting taxpayers. Information to help recognize a scam, and steps to take for those who have been targeted or have fallen prey to such predators. The final scams to be aware of are:
- Tax advice on social media can lure otherwise honest taxpayers into compromising tax situations. Two recent schemes currently circulating involve filing fraudulent Form 8944 and Form W-2.
- Spearfishing emails, where fraudsters attempt to steal client data or professional credentials from tax preparers. These can look like potential new clients or a request targeting payroll or human resource departments asking for Form W-2 information.
- Offer in Compromise “mills” claiming they can help settle IRS debts for pennies on the dollar. Taxpayers who don’t meet the technical requirements for an offer often face excessive fees from promoters for information easily obtained themselves. Taxpayers should know they can check their eligibility using the IRS’s Offer in Compromise Pre-Qualifier tool.
- Abusive tax arrangements targeting wealthy taxpayers may involve things like Charitable Remainder Annuity Trusts and monetized installment sales. The promoters often misapply the rules, leaving filers vulnerable. “People should seek out trusted, reputable tax advice and not be fooled by aggressive advertising,” says IRS commissioner Danny Werfel.
- Bogus schemes to reduce or avoid taxes may involve syndicated conservation easements, micro-captive insurance arrangements. They can also involve international methods; hiding cash and digital assets offshore or using Maltese foreign individual retirement accounts or foreign captive insurance.
- A summary of the scams may be found here.
April 18 Deadline Reminder
The IRS reminds taxpayers that Tax Day, April 18, is also the deadline for first quarter estimated tax payments for tax year 2023. These payments are usually due from those who do not have taxes withheld from their paychecks throughout the year, such as the self-employed, retirees, investors, businesses and corporations. Income not subject to withholding includes interest, dividends, capital gains, alimony and rental income. Paying estimated taxes in a timely fashion will lessen and even eliminate any penalties. Eligible taxpayers in recent disaster areas in California, Alabama, Georgia and now Tennessee have several deadlines extended to make their estimated payments. A current list of areas qualifying for disaster relief can be found at Tax Relief in Disaster Situations.
Debunking Tax Myths
“I don’t need to report income since I didn’t receive a Form 1099-K.” “If I file an extension, I don’t have to pay anything until October.” Find the truth about these and other myths before Tax Day.
Business E-File Regulations Finalized
The IRS and Treasury have issued final regulations amending the rules for filing returns and other documents electronically. Filers of partnership returns, corporate income tax returns, unrelated business income tax returns, withholding tax returns, some information returns and other statements, notifications, and reports will be required to e-file beginning in 2024. A new online portal has been created to help businesses file form 1099 returns electronically.
May 15 Disaster Area Deadlines Extended
Disaster area taxpayers in much of California and parts of Alabama and Georgia now have until Oct 16, 2023 to file various federal tax returns and make payments, the IRS has announced. Previously, the deadline had been postponed to May 15 for these areas. This deadline includes individual and business returns normally due on March 15 and April 18; returns of tax-exempt organizations normally due on May 15. Those affected also have until October 16 to make 2022 contributions to IRAs and health savings accounts. The deadline also applies to various tax payments. Current tax-related disaster information can always be found on the IRS Disaster Tax Relief page.
AMT Guidance for Insurance Providers Issued
The Treasury and IRS have issued Notice 2023-20 which provides interim guidance for insurance companies and some other taxpayers for the new corporate alternative minimum tax (CAMT) until proposed regulations are issued. The Inflation Reduction Act of 2022 created the CAMT, imposing a 15% minimum tax on the adjusted financial statement income of large corporations for taxable years beginning in 2023. Large corporations, including insurance companies, with adjusted financial statement income exceeding $1 billion will be those generally affected by the CAMT. Comments on the rules are welcome and must be submitted by April 3, 2023.
2022 Return Tax Time Guide
The IRS reminds taxpayers to gather their necessary information and visit IRS.gov or their trusted tax preparer for help with their 2022 tax return. Several changes have been implemented due to the Inflation Reduction Act and American Rescue Plan Act, including the reduction in Earned Income Tax Credit, Child Tax Credit, and Child and Dependent Care Credit amounts. Additionally, those that don’t itemize cannot deduct their charitable contributions this year. More in the Tax Time Guide series will be forthcoming.
Refund Myths Addressed
The IRS is debunking some common refund myths circulating among taxpayers.
- The IRS wants taxpayers to know that calling them or a tax professional cannot expedite your refund, nor do they have access to any special information regarding your refund date.
- Ordering a tax transcript doesn’t provide that either.
- A smaller refund doesn’t mean the IRS has a problem: outstanding child support, federal or state taxes, student loans or other debts can cause your refund to be less than expected.
The best way to find out the status of your refund is to use the Where’s My Refund tool, or the IRS2Go app.
Retirement Distributions Waived For 2020
Seniors and retirees do not have to take their usual required minimum distribution (RMD) from their IRA or workplace retirement accounts in 2020, thanks to coronavirus relief measures passed this year. The waiver includes RMDs for individuals who turned 70 ½ in 2019 and took their first RMD in 2020. Those who have already taken their RMD have the option of returning it to their qualified plan. These provisions apply to most retirement plans, including traditional IRAs, SEP IRAs, SIMPLE IRAs, 401(k) plans, 403(b) plans, and others.
Annual “Dirty Dozen” Unveiled
The IRS has published its list of the 12 most common tax scams perpetrated by criminals this year. Taxpayers should be aware and vigilant in regards to spotting and avoiding these scams, especially the ones on the rise in the wake of the pandemic and economic impact payments (EIPs). Scams on the list include phishing emails, fake charities, threatening phone calls, EIP or refund theft, organizations “overselling” Offer In Compromise assistance, payroll scams, ransomware, and more.
Foreign-Taxed Income Guidelines
The IRS has published final regulations on how income from foreign corporations subject to a high rate of foreign tax shall be treated. The final regulations allow taxpayers to exclude certain high-taxed income of a controlled foreign corporation from their Global Intangible Low Taxed Income (GILTI) computation on an elective basis. The IRS also released proposed regulations regarding that high-tax exception with the GILTI exclusion, and welcomes public comments on the subject.
Our early advance program through Republic Bank means that you can have access to some of your tax credits today.
If you want to find out how much you qualify for, stop by our office, open 9-5 until the 20th, then 9:00 Am to 8:00 PM.