Category: Tax Year 2022

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Energy Tax Credit in 2023

Posted by admin on July 13, 2023
Last modified: July 13, 2023

Does Your Home Improvement Expense Qualify For Energy Tax Credit?

Homeowners can now take advantage of extended energy tax credit for home improvements promoting efficiency and renewable power. The tax credits, available through 2034, are even being expanded starting in 2023.

What purpose do Energy Tax Credits serve for home improvements?

In an effort to make homes more energy efficient, the government has extended two tax credits available for home improvements and residential clean energy equipment. The Inflation Reduction Act of August 2022 has increased the timeline and financial benefits associated with these tax incentives.

Energy Efficient Home Improvement Tax Credit

The Inflation Reduction Act recently extended and expanded the Tax Credit for Home Improvements that are Designed to be More Efficient with regard to how they consume power. Previously this credit had a lifetime limit of $500 and was known as the Nonbusiness Property Credit, but it has now been renamed. It will remain in effect until December 31, 2022.

Starting January 1, 2023, and up until January 1, 2033, households may be eligible to receive a tax credit of up to $1,200 annually under a new law – known as “Energy Efficient Home Improvement Credit” – which amended an existing one.

energy tax credit

The new tax credit has a major advantage over its predecessor; it provides an annual limit rather than a lifetime one. In other words, by spacing out qualifying home improvements over a decade, you can claim up to $12,000 in returns on your taxes instead of just the $500 allowed before.

Making smart investments in heat pumps, biomass stoves, and boilers may be rewarded up to an extra $2,000 each year. This presents a great opportunity for individuals to take advantage of the financial incentive for greener living.

What are Energy Efficient Home Improvement qualifying home improvement for getting Energy Tax Credit?

Do certain home improvements qualify for the Energy Efficient Home Improvement energy tax credit? Starting from January 1, 2023, this tax credit can be equal to either 30% of the amount spent on eligible projects or up to an annual maximum of $1,200.

When it comes to energy-efficient home improvement credit, a current maximum of $3,200 applies annually. This includes an applicable credit limit of $1,200 and a separate aggregate yearly credit limit of $2,000 for electric or natural gas heat pump, water heaters, electric or natural gas heat pumps, and biomass stoves and boilers.

Residential Clean Energy Tax Credit

Taxpayers can take advantage of a substantial financial benefit with the Residential Clean Energy (RCE) Credit, which was extended and increased by Congress through its passage of the 2022 Inflation Reduction Act. This credit is equivalent to 30% off eligible costs for residential renewable energy amenities.

Through 2034, Congress passed an amendment to existing energy credit legislation: named Inflation Reduction Act. This bill altered applicable percentage rates as well as included battery storage technology in eligible expenses.

A tax credit is available for property brought into service between 2021 and 2033. This incentive gradually phases out over time – 26% in 2033, 22% in 2034, and 0% after December 31 of that year.

Residential Clean Energy Credit Qualifying Equipment?

The Residential Clean Energy Tax Credit is for users of solar, wind, geothermal, and fuel cell. This includes the installation of photovoltaics for the production of electricity, as well as adding a solar-powered water heater to one’s residence. To be eligible for the credit, a solar system must cover at least half of the home’s water-heating needs – hot tubs and swimming pools do not qualify.

For residential use, various technologies are available to produce electricity. These include up to 100-kilowatt turbines driven by the power of the winds. These geothermal heat pumps adhere to Energy Star standards set by the federal government, fuel cells utilizing a renewable resource such as hydrogen for a minimum of 0.5 kilowatts output, and battery storage systems.

Does the Residential Clean Energy Tax Credit Cover Roofing Expenditures?

When making improvements to one’s roof in order to mount solar panels and related hardware, it is important to note that these expenditures are typically not eligible for the Residential Clean Energy Credit. This is because they primarily serve as a means of upkeep or structural stability.

When it comes to tax savings, investing in solar roofing can be a great option. Solar roofing tiles and shingles are an excellent choice as they offer both protection for your home and the opportunity to generate solar electric energy. These investments may qualify you for a federal tax credit.

How Does Energy Tax Credits Work?

The federal government offers tax credits to citizens who invest in products and services that are designed to be more efficient with regard to the use of natural resources. These credits can be used to help reduce the cost of improvements such as new insulation or window replacements. Additionally, solar panel systems and other renewable power sources may also qualify for tax credits, making them more accessible to homeowners. This program is a great way for people to save money while doing their part in protecting our environment.

Are Energy Tax Credits Refundable?

Tax credits for the use of renewable energies are not refundable. This implies you could diminish your total tax to nothing, assuming you have a sufficiently large credit amount. However, receiving any additional credit as payment on your return is impossible when the sum surpasses the total charges due. Any unused renewable-based credits stated on your return can be transferred forward and counterbalance tax debt in upcoming years.

Will these energy efficiency tax credits make home improvements more cost-effective?

When it comes to home improvements, energy efficiency is certainly something that should be taken into consideration. These upgrades can help reduce those pesky heating and cooling bills, and they also come with potential tax credits that further enable homeowners to save money on their purchases. Therefore, when used in conjunction with cost-saving home improvements, these credits can be a great tool for lowering the overall cost of living.

In Conclusion

Those wishing to improve their homes in an energy-efficient manner may be eligible for a tax credit through Energy Efficient Home Improvement Credit.

Homeowners have a great opportunity to save money at tax time with Residential Clean Energy Credits. These credits can be applied toward specific pieces of equipment, such as solar panels, wind turbines, geothermal systems, and fuel cells.

The solar, wind and geothermal equipment installed in both your principal residence and any other home used as a residence can be claimed for the credit. However, fuel-cell equipment is eligible to acquire this credit exclusively when placed in the main house.

PriorTax offers an easy solution to get your taxes done right; our free dedicated Tax Professionals are here to help from start to finish. We guarantee our services will provide you with the highest return possible as we take the time to search for any and all available tax deductions and tax credits that you qualify for.

Educator Expense Tax Deduction

Posted by admin on June 29, 2023
Last modified: June 27, 2023

What You Need to Know about Educator Expense Tax Deduction?

Are you an educator in need of tax relief? The Educator Expense Tax Deduction is a great option for teachers and certain academic administrators. This tax deduction allows them to reduce their taxable income by the cost of technology, supplies, and training expenses. This deduction will let you subtract up to $300 worth of qualified expenses from your taxes for 2022. Here’s all you need to know about taking advantage of this deduction on your next tax return.

Do you have any expenses related to your job as an educator? 

From purchasing crayons and books for your classroom to taking classes at your own expense, a tax deduction can help offset some of those costs.

Qualified expenses include purchases such as:

When it comes to making purchases, a few qualify as an expense. These include: 

Books and supplies necessary for the classroom setting, as well as technology and computer software, needed to be utilized in the process of educating students.

When it comes to educating yourself, there are certain expenses that you can claim a deduction for. Qualifying purchases fall into this category, and as an educator, you may even be eligible for the Educator Expense Deduction when it comes to professional development courses related to teaching, which your school or another organization has not reimbursed.

Educator Expense Tax Deduction

What are the Requirements for the Educators?

To be qualified for the Educator Expense Tax Deduction, educators must meet certain eligibility criteria.

To Qualify, You must:

  • Currently employed by a school providing classes determined by state law
  • Working as a teacher, instructor, counselor, principal, or classroom aide
  • Working with kindergarten through grade 12 students
  • Working at least 900 hours during the school year

Any teacher or counselor who meets the required work hours and purchases materials needed for their job could take advantage of the deduction. In particular, a first-grade educator working at a public school would qualify, as would a guidance counselor who bought supplies to assist students.

Unfortunately, those employed by or involved with preschools, homeschooling their children, or universities and graduate schools would not be able to benefit from this tax deduction.

A special tax deduction is available from IRS for married couples who are both educators under the Educator Expense Tax Deduction. In 2022, they can apply for a joint tax deduction of up to $600, with no more than $300 in expenses for each person. Thus, two teachers filing taxes jointly stand to receive extra financial relief.

How Can the Educator Expense Work for Your Tax?

Are you eligible for the Educator Expense Tax Deduction? As a teacher, it is important to check that both the minimum hours requirement and the school qualify. Once this has been established, look at what expenses over the preceding year could be eligible for deduction under this scheme.

Few Factors to Considered for Tax Deduction

The amount you can deduct from taxes depends upon several factors. Any expenses reimbursed by your school, covered by a grant, or financed through another source cannot be tax deducted.

When calculating how much can be tax deducted from taxes, several components must be taken into consideration. This includes any costs that surpass withdrawals that don’t need to be reported on a tax return, such as funds from a Coverdell Education Savings Account and state tuition programs. Interest on savings bonds also can be excluded from the deduction of higher education expenses.

Certain components play a role when figuring out what you can tax deduct from your taxes. Before the 2018 tax year, any eligible costs beyond the Educator Expense limits could be mentioned when itemizing deductions.

Tax season can be intimidating, so why not rely on a tax expert to relieve the stress? PriorTax offers an efficient and secure way of filing your taxes, guided by dedicated tax professionals. All you have to do is answer some simple questions, and they’ll take care of the rest – ensuring you get the maximum refund possible. Plus, it’s free! File with PriorTax and experience the confidence of knowing you’re in good hands.

Self Employment Tax Write Off

Posted by admin on March 30, 2023
Last modified: March 29, 2023

When you work for yourself, the need to plan for taxes can’t be overstated. Therefore, we always suggest that freelancers store away 20-30% of their income to pay what they owe in taxes. This should cover taxes due from both income and self-employment sources. The key is planning ahead of the IRS and keeping better track of income and expenses throughout the year. As a freelancer, you’ll likely be able to deduct typical household expenses from your taxable income. For example, you can deduct any work-related expenses you spend on business-related items such as cell phones, Internet service, software, and office supplies. You may also be able to benefit from self employment tax write off some home office expenses.

Why Do self-employed pay more in taxes?

Are the tax regulations different for self-employed individuals? The short answer is a resounding yes. The more extended response is that there isn’t a huge difference, but it can certainly seem like it. Self-employed people have to pay increased Social Security and Medicare taxes, yet they are also allowed certain write-offs to counterbalance this additional expenditure. However, due to the absence of tax deductions being taken out, their overall tax bill might appear excessive.

Self Employment Tax Write Off

Are Self-employed paying more in FICA taxes?

Individuals working for themselves are subject to a higher FICA tax rate than those employed by a company. Specifically, the total percentage of Social Security and Medicare taxes they must pay is 7.65% greater than that traditional W-2 employees are required to pay – an amount that can add up significantly over time.

Self-employed claim business tax write-offs.

One of the major benefits for those who are their boss is the ability to take advantage of beneficial business tax write-offs. These write-offs often mean that a person who works on their ends up owing less taxes than someone with a W2 job. Unfortunately, however, only some know how to utilize these deductions advantageously.

Self-employed do not get tax withholding.

One unexpected challenge for freelancers, gig workers, small business owners, or independent contractors is that their taxes are often much higher than traditional W-2 employees. This is because most workers in this category don’t have any tax withheld from their salaries. As a result, when filing their taxes, many are surprised at how much they need to pay the IRS. On the contrary, W-2 employees usually have Social Security, Medicare, and income taxes are taken out of each paycheck throughout the year. Therefore they generally receive a large refund once it’s time to file their returns.

Those freelancing or operating as independent contractors need an employer to take care of their taxes. It can be a nasty surprise when realizing how much they owe as they file their taxes. Those who were used to the W-2 lifestyle they’re now paying more in taxes; however, it’s just that they are paying all of it in one go.

So, what taxes do self-employed need to prepare?

When it comes to filing taxes, self-employed individuals face the dilemma of paying two distinct types: income and self-employment tax. But just how much will be levied on your earnings? Generally speaking, all incomes are subject to income tax.

Are you aware of the income tax expenses?

Income tax applies to wages, business income, interest, rent, and pensions – almost any type of income. As such, self-employed individuals will likely be in the 10-22% range for their tax bill. The average rate is usually 14%.

Why you shouldn’t use your effective tax rate to budget?

There may be better ways to budget than the effective tax rate because the calculator results show a much lower percentage regarding federal income taxes. To explain this further, an example will be used – say you earned $50,000 from self-employment. The top income tax rate for this amount is 22%. This does not provide the whole picture, though, as other factors must also be considered – such as your standard deduction, which will reduce what you owe at tax time.

This information needs to indicate what your actual tax rate will be. It is rather meant to show how much of your income must be put aside when filing taxes.

Important tax breaks that will lower your taxes‍

Knowing how much will be taken off your income taxes can provide beneficial information. However, to understand why two rates may not match up, one must first know what is subtracted from a person’s taxable income. These subtractions include a standard deduction of $12,950, half of the self-employment tax amounting to $3,672, and a qualified business income deduction equaling $9,600.

Your standard deduction ($12,950)
Half of your self-employment tax ($3,672)
Your qualified business income deduction ($9,600)

After subtracting the necessary amounts, your taxable income should be approximately $22,000. This will likely place you in the 12% tax bracket.
To ensure that you can pay your taxes, allotting 5% of your total earnings ($48,000) is recommended. Nevertheless, this doesn’t mean that it’s all there is to taxation.

What do you need to know about self-employment tax?

Two government programs, Social Security and Medicare, collect a self-employment tax from working individuals that don’t have an employer. In these cases, the tax is collectively known as “self-employment taxes,” with a combined rate of 15.3%. This type of tax differs from income taxes because it only applies to business income reported on a 1099 form. On the other hand, those people who do have employers are subject to “FICA taxes,” which are automatically deducted by their employer from their paychecks.

Why not all business income is subject to self-employment tax?

Not all business income is liable for self-employment tax – only net business income. This means that the remaining amount is subject to taxation after any relevant deductions, such as inventory purchases or phone bills. To this end, utilizing write-offs can be an excellent way to reduce total taxes due on income earned from a trade or profession.

For the most accurate prediction of your taxes, you must use the net monthly self-employment income in the corresponding calculator.

How to find tax write-offs with PriorTax?

Do you need help getting the most out of your tax write-off options? PriorTax offers a range of services to ensure self-employed workers take advantage of all available deductions. Our team provides an end-to-end solution so that you get everything when it comes to filing your taxes.

How to budget for self-employment taxes?

Creating a budget for self-employment taxes is essential in the United States. This is due to the “pay-as-you-go” tax system that requires taxes to be paid as money is earned, not when filing taxes. Therefore, to avoid penalties and interest, anybody expecting to owe more than $1,000 in taxes should make estimated payments during the year. Doing so ensures they are not fined when they file their final tax return.

Money management can often feel like a daunting task, especially when money is tight. Nevertheless, setting aside funds for tax payments can be achieved with the right strategies and avoiding certain financial pitfalls. Here we present some time-tested methods that have proven effective for keeping yourself on track financially.

Discover how to maximize your income. For those starting as self-employed, a W-2 job often serves as the initial point of reference for what constitutes a competitive wage. Yet things can feel uncertain when they take the plunge and become their own boss.

One common mistake that is made is neglecting to consider things such as taxation, leading to an underestimate of their price and therefore undercharging for their services.

There is no doubt that it’s time to raise your rates. It is important to add a mark-up to every invoice you issue so that you can cover the self-employment taxes. Always underestimate yourself, and make sure you are paying attention to your services. Each time you submit an invoice, ensure that there is sufficient payment for the work performed.

Establishing a payment plan that suits you best

Surprising to some, there is no obligation to make estimated tax payments on the exact due date. Instead, paying as often as required is possible to stay on top of things.

Many individuals favor making regular biweekly or monthly payments to avoid holding onto their taxes for too long. Plus, with a set schedule, it becomes easier to become accustomed to the process and avoid relearning the procedure each quarter.

Gaining control with auto transfers

Like enrolling in a gym membership without much thought, taking advantage of auto transfers is an easy way to put money away for yourself. In addition, many banking institutions provide the opportunity to move funds from one account to another automatically – making saving for taxes effortless and stress-free.

Change it up with a new bank

Instead of making your savings account too easily accessible, why not open an account at a totally different bank? That way, you’ll need extra effort to transfer money. On the other hand, all it takes is a single click of the button, and funds are moving back and forth – so adding an extra layer might be desirable.

Property Tax 2022

Posted by admin on December 27, 2022
Last modified: February 13, 2023

Welcome to the exciting world of property taxes! In this article, we’ll be discussing how assessors calculate your annual property tax liability.

Are you thinking about buying a new home? If so, then there are a lot of things to take into account. One of the most important factors for many people is the community they’ll be living in. But another important consideration is how your property taxes will contribute to supporting your local area through things like schools and infrastructure. In the United States, all 50 states have laws requiring most property owners to pay real estate taxes. These taxes can vary from state to state.

When you’re searching for a new home, it’s important to keep property taxes in mind. They can add a significant amount to your overall homeownership costs. Here’s some basic information on property taxes, including a state-by-state breakdown, to help you get started.

What Are Property Taxes?

There are a few things to know about paying your real estate taxes. They’re based on the assessed value of your home, and rates can vary by state. But generally speaking, this is a tax that homeowners pay to their county or local government. So, when budgeting for your annual expenses, be sure to factor in your real estate taxes.

As a homeowner in the United States, you are likely responsible for paying property taxes on a monthly basis, along with your mortgage payments. Once you pay off your loan, you may receive a bill for the tax from local government periodically throughout the year. The money collected through property taxes goes towards supporting the community, including infrastructure improvements, public services and local public schooling.

property tax

What Are Property Taxes Based On?

The value of your home is important for many things, including your property taxes. It’s important to know that the assessed value for property taxes may not always match the actual value of your home. This can affect how much you owe in taxes. Property tax amounts can vary depending on the state and county you live in, as well as the overall value of your home. This includes both the land and any structures on it.

The first thing you need to know is that all calculations are based on a unit called a mill, which is equal to one-thousandth of a dollar. With that in mind, let’s take a look at the three values that are used to find your annual property tax liability:

  • the state tax rate
  • the assessment ratio (the portion of the property value subject to tax),
  • and the property value.

States Ranked By Property Tax

State Property Taxes ranked from the lowest to highest

*$217,500 is the median home value in the U.S. as of 2019, the year of the most recent available data.

RankStateReal Estate Tax RateAnnual Property TaxAverage Home Price
1Hawaii0.28%$606 $615,300 
2Alabama0.41%$895 $142,700 
3Colorado0.51%$1,113 $343,300 
4Louisiana0.55%$1,187 $163,100 
5D.C0.56%$1,221 $601,500 
6Delaware0.57%$1,240 $251,100 
6South Carolina0.57%$1,238 $162,300 
8West Virginia0.58%$1,269 $119,600 
9Nevada0.60%$1,310 $267,900 
10Wyoming0.61%$1,319 $220,500 
11Arkansas0.62%$1,358 $127,800 
12Utah0.63%$1,362 $279,100 
13Arizona0.66%$1,446 $225,500 
14Idaho0.69%$1,492 $212,300 
15Tennessee0.71%$1,548 $167,200 
16California0.76%$1,644 $505,000 
17New Mexico0.80%$1,740 $171,400 
18Mississippi0.81%$1,751 $119,000 
19Virginia0.82%$1,779 $273,100 
20North Carolina0.84%$1,833 $172,500 
20Montana0.84%$1,818 $230,600 
22Indiana0.85%$1,853 $141,700 
23Kentucky0.86%$1,866 $141,000 
24Florida0.89%$1,934 $215,300 
25Oklahoma0.90%$1,952 $136,800 
26Georgia0.92%$2,006 $176,000 
27Oregon0.97%$2,116 $312,200 
27Missouri0.97%$2,111 $157,200 
29Washington0.98%$2,134 $339,000 
29North Dakota0.98%$2,138 $193,900 
31Maryland1.09%$2,370 $314,800 
32Minnesota1.12%$2,429 $223,900 
33Alaska1.19%$2,599 $270,400 
34Massachusetts1.23%$2,667 $381,600 
35South Dakota1.31%$2,857 $167,100 
36Maine1.36%$2,953 $190,400 
37Kansas1.41%$3,060 $151,900 
38Michigan1.54%$3,343 $154,900 
39Ohio1.56%$3,390 $145,700 
40Iowa1.57%$3,407 $147,800 
41Pennsylvania1.58%$3,442 $180,200 
42Rhode Island1.63%$3,548 $261,900 
43New York1.72%$3,749 $313,700 
44Nebraska1.73%$3,754 $155,800 
45Texas1.80%$3,907 $172,500 
46Wisconsin1.85%$4,027 $180,600 
47Vermont1.90%$4,135 $227,700 
48Connecticut2.14%$4,658 $275,400 
49New Hampshire2.18%$4,738 $261,700 
50Illinois2.27%$4,942 $194,500 
51New Jersey2.49%$5,419 $335,600 
property tax by state
Source: WalletHub

State Property Tax Exemptions

As a homeowner in the United States, you are generally required to pay property taxes. However, there are some exceptions where certain properties may be exempt from this tax. This is different from a tax deduction, which only lowers the amount of taxes that an individual or group owes. Property tax exemptions can include qualifying individuals such as senior citizens, STAR participants, those with disabilities and veterans. Certain eligible government entities, nonprofit organizations and religious groups may also fall under an exemption.