Formerly Known as Dependable Payroll Tax Service or DP Tax Service
DP Tax Service
DP Tax & Accounting LLC
Residential Energy Credit
The American Recovery and Reinvestment Act provides tax incentives for individuals to invest in energy-efficient products. Taxpayers who take energy saving steps may get a bigger tax savings.
The following are some key points about theNonbusiness Energy Property Credit:
The new law increases the credit rate to 30 percent of the cost of all qualifying improvements and raises the maximum credit limit to $1,500 claimed for 2009 and 2010 combined.
The credit applies to improvements such as adding insulation, energy-efficient exterior windows and doors, energy-efficient heating and air conditioning systems, and certain metal and asphalt roofs.
The improvements must be made to the taxpayer’s principal residence located in the United States (must be existing home).
Qualifying improvements must be placed into service after December 31, 2008, and before January 1, 2011.
The following are some key points about the Residential Energy Efficient Property Credit:
The new law removes some of the previously imposed maximum amounts and allows for a credit equal to 30 percent of the cost of qualified property.
The credit is available to help individual taxpayers pay for qualified residential alternative energy equipment, such as solar hot water heaters, geothermal heat pumps and wind turbines.
Both existing homes and new construction qualify.
Both principal residences and second homes qualify (rental property does not qualify).
Qualifying improvements to the taxpayer’s home in the United States must be placed in service before January 1, 2017.
Homeowners who have been considering some energy efficient home improvements may find these tax credits will result in bigger tax savings. Taxpayers must claim the credit on the tax return for the year that the improvements are made.
Manufacturers must certify that their products meet new standards and they must provide a written statement to the taxpayer such as with the product packaging or in a printable format on the manufacturers’ Web site.
Taxpayers should keep a copy of the manufacturer’s certification statement and receipts with their other important tax records.
Please note, not all ENERGY STAR products qualify for a tax credit. For detailed information about qualifying improvements,
visit the U.S. Department of Energy’s EnergyStar Website.
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Expiring Bush Tax Cuts
1. Federal Tax Rates Increase - For Everyone
Currently the lowest tax bracket is 10% and the highest bracket is 35%. When the Bush Tax cuts expire the lowest tax bracket will go up to 15% and the highest tax bracket will go up to 39.6%. Every person that has Earned Income will see their Tax liability go up.
2. Marriage Penalty Increases
When the tax code was first written, the Husband went to work, and the Wife stayed home with the kids. So to give the Husband a break on his taxes since his income was supporting two or more people, he got a break on his taxes by having a larger standard deduction, and wider tax brackets. Now because this married couple lived in the same home, his costs weren’t really double those of a single person, so Congress decided that 167% of the single deduction and tax brackets (100%) would be fair. Now that both the husband and wife both work, they still only got the 167% of what a single tax payer would get. If instead of getting married the couple just lived together, as if they were married, then they would both get the Single rate, thus getting a total of 200% of the single rate. This difference has been referred to as the “Marriage Penalty.” The Bush Tax cuts decided that a policy that promoted the weakening of Marriage as part of our society was bad. To solve this problem they extended the Standard Deduction and the Tax brackets to 200% of the Single counterparts regardless of whether both the husband and wife worked or not. When the bush tax cuts expire we will go back to 167% rates and brackets. Raising taxes on married couples more than if they were single
3. Increased Capital Gains Taxes
Currently if you are in the 10% or 15% tax brackets, the tax rate is 0% (yes zero percent) and if you are in a higher tax bracket then you only pay 15% tax on any long term capital gains. When the Bush tax cuts expire next year, then people in the lowest tax bracket will pay 15% while everyone else will pay 20% tax on long term capital gains. To be long term they asset sold (Stocks, Vacation homes, …) must have been owned for more than a year.
4. Tax Rate on Dividends Goes Up
The Bush tax cuts reduced the maximum rate on qualified dividends to 15% and tied them to the capital gains rates. Before they would have been included in regular income and taxed at the taxpayers marginal rate. Qualified dividend income means dividends received during the taxable year from domestic corporations and "qualified foreign corporations". When the Bush tax cuts expire qualified dividends will no longer be linked to the capital gains rates and will be taxed at your regular tax rate.
5. Child Tax Credit Cut In Half
The child tax credit is a federal tax break designed to reduce taxes for people with children. Currently, the tax credit provides $1,000 in relief for every qualified child younger than 17. If the tax cuts expire, the break will go back to being only $500 per qualified child.
6. Personal Exemptions Phased Out – Again
Each taxpayer gets to exempt a curtain amount of income, for 2010 that amount was $3650 per person claimed as an exemption on their tax returns. When the Bush tax cuts expire, those in the upper tax brackets will have the amount reduced.
7. Itemized Deductions Disappear
Many taxpayers chose to itemize their tax deductions. Particularly those that pay mortgage interest and property taxes. As your income goes up, the tax law starts letting you deduct less and less of the full value of your itemized deductions. The Bush tax cuts reduced and finally eliminated the deduction phase-out. Starting next year it will be back to full strength again.
8. The Estate Tax Returns
In 2010, estates of any value are not taxed when the owner dies. In 2011, the estate tax rate is scheduled to return back to 55% on estates values in excess of $1 million. Will Your Tax Bill Go Up? Some commentators like to point out that the tax increases we would see in 2011 are not actually "increases", but a return to the way things were before the tax cuts were implemented. However, after living with these tax cuts for so long, they seem like a permanent fixture - especially for young workers who never knew the higher rates. There's no denying that higher tax rates stunt economic growth and reduce entrepreneurship and incentives to work. These effects of taxation are never a good thing, but their harmful effects would be more pronounced in today's unfavorable economic climate.
Ultimately, what most people want to know is, "How will these changes affect me?" To put an actual number value on how much the expiring tax cuts could cost you, try the Tax Foundation's 2011 Income Tax Calculator at www.mytaxburden.org.
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Still Playing with the Bush Tax Cuts
Stay Tuned. In the January newsletter I will go into what this bill means and what pork was added to get it passed.
Update Friday December 17th 2010
President Obama signs the Bush Tax Cut Extension in to law. For a complete copy of the bill click HERE.
Update Thursday December 16th 2010
Procedural hurdles blocked the vote for most of the day on Thursday. The House was reconvened Thursday evening to settle the debate. First they held a vote on an amendment to change the estate tax rules from 35% to a 45% maximum tax rate, and reducing the exemption from $5 Million to $3.5 Million. This amendment was defeated by a vote of 233 - 194. Next they voted on the bill passed by the senate and that passed with a vote of 277 - 148.
Update Wednesday December 15th 2010
Senate Voted 81-19 to pass the "Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010" (bill's short name, yea ok short?) on Wednesday, and is now forwarding it to the House for their consideration.
Update Friday December 10th 2010
Well it seams like the measure will have the support of the Senate after negotiations added a few more items to sweeten the deal. Added were tax provisions designed to increase production of hybrid automobiles, biodiesel fuel, energy-efficient homes, coal and energy-efficient household appliances would be extended through the end of 2011. Another measure created a tax break for commuters who use mass transit, allowing them to set aside up to $230 dollars per month to cover transit costs. That money wont be taxed as long as it will be used to pay for mass transit.
Of course House Democrats voted, in a closed door meeting, on Thursday to not allow the package to reach the floor for a vote without changes. Democrats object to the deal because it is generous to the rich, especially the provision that cut the estate tax.
Update Wednesday December 8th 2010
Liberal Democrats say Obama Compromised went to far in giving Republicans what they wanted, and are attempting to block Nancy Pelosi from bringing the bill up for a vote in the House. They say they are not happy using Unemployment Insurance as a bargaining chip, but it appears that the thing that they are really unhappy about is that the tax rates on estates will be to low and the exemption will be to large. It looks like this could take a while before it can get passed. Republicans are not pushing to hard for immediate passage as they know that in January when they control the House and have more influence in the Senate that they can pass a bill with less of the Democrat wanted concessions that does not add to the deficit.
It looks like this could take a while, keep checking back and I will keep updating as things happen.
Update Tuesday December 7th 2010
Well it seams that Obama and Congressional Republicans to create a compromise bill that they hope will pass through congress. The guts of the bill includes:
1) Extending the Bush Tax Cuts for 2 more years for all income levels.
2) A 2% reduction of the Employee portion of social security taxes for 2011.
3) The estate tax while still being reinstated will have a maximum tax rate of 35% with a $5 Million exemption, as opposed to the 55% and $1 Million exemption that was scheduled to happen.
4) Unemployment insurance is extended for an addition 13 Months (56 Weeks) for those who are still collecting unemployment benefits now.
5) Ratification of the START nuclear treaty.
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