You’ve read that they passed the “inflation Reduction Act”. You should consider the tax credits that are available next year in your tax planning strategy. It might affect whether you decide to purchase a new air conditioner, a new water heater, a new or used electric vehicle and how you purchase health insurance.
Health Care extensions.
Are you aware of the American Rescue Plan Act that has been extended. It allows taxpayers with incomes above 400 percent of the Federal Poverty Level to qualify for the Premium Tax Credit. There are two ways to get the credit. If you qualify for advance payments of the premium tax credit (APTC), you can choose to have amounts paid directly to the insurance provider to help cover your monthly premiums. You can also choose to get all of the benefit when you claim the PTC on your tax return. If you haven’t discussed this with us before, make sure you do.
The Affordable Care Act has been extended. The Affordable Care Act (ACA) is designed to make guaranteed issue health insurance plans available to everyone. These plans cover preexisting conditions along with a list of essential health benefits that don’t change from plan to plan.
Home Improvement credit for Energy Efficiency.
The Nonbusiness Energy Property Credit was extended through 2032. Inflation Reduction Act brings it back to life, improves it substantially, and even gives it a new name – the Energy Efficient Home Improvement Credit.
The old, expired credit was worth 10% of the costs of installing certain energy-efficient insulation, windows, doors, roofing, and similar energy-saving improvements in your home. You could also claim the credit for 100% of the costs associated with installing certain energy-efficient water heaters, heat pumps, central air conditioning systems, furnaces, hot water boilers, and air circulating fans.
The annual limits for specific types of qualifying improvements will also be modified – and for the better. Beginning in 2023, they will be:
- $150 for home energy audits:
- $250 for an exterior door ($500 total for all exterior doors);
- $600 for exterior windows and skylights; central air conditioners; electric panels and certain related equipment; natural gas, propane, or oil water heaters; natural gas, propane, or oil furnaces or hot water boilers; and
- $2,000 for electric or natural gas heat pump water heaters, electric or natural gas heat pumps, and biomass stoves and boilers (for this one category, the $1,200 annual limit may be exceeded).
For eligible home improvements after 2024, no credit will be allowed unless the manufacturer of any purchased item creates a product identification number for the item, and the person claiming the credit includes the number on his or her tax return.
Electric Vehicles:
The Inflation Reduction Act extends the Clean Vehicle Credit until the end of 2032 and creates new credits for previously-owned clean vehicles and qualified commercial clean vehicles.
Tax credits include up to:
- $7,500 for the purchase of new qualified commercial clean vehicles;
- $40,000 for vehicles over 14,000 pounds; and
- the lesser of 30 percent of the price of used electric vehicles or $4,000.
Limitations apply based on the manufacturer’s suggested retail price of the vehicle. There are also limitations for the new vehicle credit based on adjusted gross income (AGI) thresholds – for single or married filing separately taxpayers, the limit is $150,000; for taxpayers filing as head of household, the limit is $225,000; and for married filing jointly, or surviving spouse taxpayers, the limit is $300,000. Reduced AGI limitations apply to the used vehicle credit.
PS Tax Solutions provides complete accounting services in Tampa or Lutz. For more information, go to https://pstaxsolutions.com/ or call (813) 563-8724 for an appointment.