An estimated 190 million Americans have recently been under heat advisory alerts, according to the National Weather Service. That may have spurred you to think about making your home more energy efficient — and there’s a cool tax break that may apply. Thanks to the Inflation Reduction Act of 2022, you may be able to benefit from an enhanced residential energy tax credit to help defray the cost.

Eligibility rules

If you make eligible energy-efficient improvements to your home on or after January 1, 2023, you may qualify for a tax credit of up to $3,200. You can claim the credit for improvements made through 2032.

The credit equals 30% of certain qualified expenses for energy improvements to a home located in the United States, including:

1. Qualified energy-efficient improvements installed during the year,
2. Residential “energy property” expenses, and
3. Home energy audits.

There are limits on the allowable annual credit and on the amount of credit for certain types of expenses.
The maximum credit you can claim each year is:

1. $1,200 for energy property costs and certain energy-efficient home improvements, with limits on doors ($250 per door and $500 total), windows ($600 total), and home energy audits ($150), as well as
2. $2,000 per year for qualified heat pumps, biomass stoves, or biomass boilers.

In addition to windows and doors, other energy property includes central air conditioners and hot water heaters.

Before the 2022 law was enacted, there was a $500 lifetime credit limit. Now, the credit has no lifetime dollar limit. You can claim the maximum annual amount every year that you make eligible improvements until 2033. For example, you can make some improvements this year and take a $1,200 credit for 2023 — and then make more improvements next year and claim another $1,200 credit for 2024.

The credit is claimed in the year in which the installation is completed.

Other limits and rules

In general, the credit is available for your main home, although certain improvements made to second homes may qualify. If a property is used exclusively for business, you can’t claim the credit. If your home is used partly for business, the credit amount varies. For business use up to 20%, you can claim a full credit. But if you use more than 20% of your home for business, you only get a partial credit.

Although the credit is available for certain water heating equipment, you can’t claim it for equipment that’s used to heat a swimming pool or hot tub.
The credit is nonrefundable. That means you can’t get back more on the credit than you owe in taxes. You can’t apply any excess credit to future tax years. However, there’s no phaseout based on your income, so even high-income taxpayers can claim the credit.

Collecting green for going green

Contact us if you have questions about making energy-efficient improvements or purchasing energy-saving property for your home. The Inflation Reduction Act may have other tax breaks you can benefit from for making clean energy purchases, such as installing solar panels. We can help ensure you get the maximum tax savings for your expenditures. Stay cool!

© 2023

If you’re planning your estate or you’ve recently inherited assets, you may be unsure of the “cost” (or “basis”) for tax purposes.

How do the rules work?

Under the current fair market value basis rules (also known as the “step-up and step-down” rules), an heir receives a basis in inherited property equal to its date-of-death value. So, for example, if your grandfather bought stock in 1940 for $600 and it’s worth $1 million at his death, the basis is stepped up to $1 million in the hands of your grandfather’s heirs — and all of that gain escapes federal income tax.

The fair market value basis rules apply to inherited property that’s includible in the deceased’s gross estate, and those rules also apply to property inherited from foreign persons who aren’t subject to U.S. estate tax. It doesn’t matter if a federal estate tax return is filed. The rules apply to the inherited portion of property owned by the inheriting taxpayer jointly with the deceased but not the portion of jointly-held property that the inheriting taxpayer owned before his or her inheritance. The fair market value basis rules also don’t apply to reinvestments of estate assets by fiduciaries.

What if assets are given before death?

It’s crucial to understand the current fair market value basis rules so that you don’t pay more tax than you’re legally required to.

For example, in the above example, if your grandfather decides to make a gift of the stock during his lifetime (rather than passing it on when he dies), the “step-up” in basis (from $600 to $1 million) would be lost. Property that has gone up in value acquired by gift is subject to the “carryover” basis rules. That means the person receiving the gift takes the same basis the donor had in it ($600 in this example), plus a portion of any gift tax the donor pays on the gift.

A “step-down” occurs if someone dies owning property that has declined in value. In that case, the basis is lowered to the date-of-death value. Proper planning calls for seeking to avoid this loss of basis. Giving the property away before death won’t preserve the basis. That’s because when property that has gone down in value is the subject of a gift, the person receiving the gift must take the date of gift value as his basis (for purposes of determining his or her loss on a later sale). Therefore, a good strategy for a property that has declined in value is for the owner to sell it before death so he or she can enjoy the tax benefits of the loss.

Need help with estate planning and taxes?

These are the basic rules. Other rules and limits may apply. For example, in some cases, a deceased person’s executor may be able to make an alternate valuation election. Contact us for tax assistance when estate planning and taxes as they relate to inheritances.

© 2023

The rise of remote work has created new challenges for businesses when it comes to tax compliance. With employees working from all over the world, it can be difficult to keep track of where they are working and what taxes they owe.

In this article, we will discuss the nuances of tax compliance for remote workers and provide tips for ensuring your remote workforce stays tax compliant.

1. Understand the tax implications of remote work

The first step to ensuring tax compliance for remote workers is to understand the tax implications of remote work. This includes understanding the different tax laws that apply to remote workers, as well as the different ways that remote workers can be taxed.

For example, in the United States, remote workers are typically taxed based on their state of residence. However, there are some exceptions to this rule, such as if the remote worker spends a certain amount of time working in another state.

2. Establish clear policies and procedures

Once you understand the tax implications of remote work, you need to establish clear policies and procedures for your remote workforce. These policies and procedures should outline how you will track the location of your remote workers, how you will determine their tax liability, and how you will determine their tax liability and remittance.

3. Stay up-to-date on tax laws

The tax laws that apply to remote workers are constantly changing. It is important to stay up-to-date on these changes so that you can ensure that your remote workforce is always tax compliant.

There are a number of resources that you can use to stay up-to-date on tax laws, such as the IRS website, the website of your state’s tax department, or by consulting your Whalen CPA advisor.

4. Use a tax compliance software

There are a number of tax compliance software programs that can help you to manage the tax liability of your remote workforce. These software programs can help you to track the location of your remote workers, determine their tax liability, and collect and remit taxes.

Using a tax compliance software program can help to simplify the process of tax compliance for remote workers and help you to avoid costly mistakes.

5. Work with a tax professional

If you are unsure about the tax implications of remote work or if you need help establishing clear policies and procedures, you should work with a Whalen tax professional. A tax professional from Whalen can help you to understand the tax laws that apply to remote workers and help you to develop a tax compliance plan for your remote workforce.

 

Navigating tax compliance for remote workers can be complex. However, by following the tips in this article, you can ensure that your remote workforce stays tax compliant.

By understanding the tax implications of remote work, establishing clear policies and procedures, staying up-to-date on tax laws, and working with a tax professional, you can simplify the process of tax compliance for remote workers and help avoid costly mistakes. Contact us to take the next step.

Growing your business is a challenging but rewarding endeavor. It takes hard work, dedication, and a clear plan. If you’re ready to take your business to the next level, here are some proven strategies for growth and expansion:

1. Define your goals. What do you want to achieve with your business? Do you want to increase sales, expand into new markets, or launch new products or services? Once you know your goals, you can develop a plan to achieve them.
2. Understand your target market. Who are your ideal customers? What are their needs and wants? Once you understand your target market, you can tailor your products or services to meet their needs.
3. Market your business effectively. Get the word out about your business and your products or services. Use a variety of marketing channels, such as online marketing, social media, and traditional advertising.
4. Provide excellent customer service. Make sure your customers are happy and satisfied with your products or services. This will help you build loyalty and encourage repeat business.
5. Invest in your business. Invest in your business by upgrading your equipment, hiring new employees, or expanding into new markets. This will help you grow your business and reach new heights.

In addition to these general strategies, there are a number of specific business development strategies that you can use. Here are a few examples:

• Market penetration: This strategy involves increasing your market share in your existing market. You can do this by increasing your marketing efforts, expanding your distribution channels, or offering new products or services.
• Market development: This strategy involves expanding into new markets. You can do this by entering new geographic areas, targeting new customer segments, or selling your products or services online.
• Product development: This strategy involves developing new products or services. You can do this by expanding your product line, offering new features or benefits, or creating new products or services that meet the needs of new customer segments.
• Diversification: This strategy involves expanding into new lines of business. You can do this by acquiring new businesses, starting new businesses, or entering into joint ventures.

The best growth and expansion strategy for your business will depend on your specific situation. However, by following the strategies outlined above, you can increase your chances of success.

Regardless of the strategies you deploy, we highly encourage you to:

• Be patient. Growing your business takes time and effort. Don’t get discouraged if you don’t see results immediately.
• Be flexible. Things change, so be prepared to adapt your plans as needed.
• Be persistent. Don’t give up on your dreams. Keep working hard, and you will eventually achieve your goals