Federal Energy Tax Credit

The creation of various types of federal energy tax credit and solar tax credit has proven to be a stimulus to alternative energy production. These credits make it more cost efficient to manufacture, install and purchase a renewable energy system for homes and businesses. Technologies which are included in this program are solar and photovoltaic energy, geothermal, wind energy, hydroelectric and alternative fuels. The government rewards investors in renewable energy sources by tax credits, deductions and allowances. These may include rewards in the area of income, corporate, property, and sales tax. Some of these incentives will expire soon, so green-energy advocates urge that the government should support an extension of these aids so that these industries can continue to expand, providing not only new sources of clean energy, but also growth in the number of jobs connected to this sector of industry.

Although they sound similar, there is a significant difference between a credit and a deduction. When a deduction is used, the amount is subtracted from income before computing tax liability. A credit, however, is subtracted directly from the total tax owed. Therefore, a credit winds up extending a three (or more) times greater effect. Do some research before signing contracts for products, and check the online Database of State Incentives for Renewables and Efficiency for information on state, local, federal and even utility company incentives.

Congress has routinely extended deadlines for federal energy tax credit. An individual can take both a credit (up to a specified cap) for about a third of the cost of installing photovoltaic (solar electric panel) systems and another one (up to an additional cap) for about a third of the cost of a solar water heating system. (Unfortunately for owners of pools and hot tubs, the solar tax credit does not apply to these items.) Another credit is available for fuel cells. Equipment must be certified by the Solar Rating Certification Corporation (SRCC) or another entity which a state government chooses.

A pitfall to avoid is the fact that many dealers who advertise themselves as 'solar dealers' are not only without connection to the Solar Rating Certification Corporation, but also may not even be licensed contractors! The systems they sell may not be SRCC approved. If a person takes an exemption from installing a non-approved system, he or she will be liable for any tax penalties incurred. Be sure that the installer is a licensed solar contractor, installing a properly approved system. There are websites which can recommend a list of solar contractors and products in areas throughout the United States.

The solar tax credit is figured out based on an individual's expenses for equipment (including labor). However, this does not include any expenses which have been subsidized by other programs. Fill out IRS Form 5695 to apply for this program. Various forms of federal energy tax credit programs have run their course and some have been extended. Groups are urging an eight year extension to current programs, in order to give the industry some sense of stability as members consider future investments. However, there is no guarantee that an extension will happen, so one is left wondering whether it is best to rush to complete renewable energy projects before the deadline, or wait and hope that a lengthy extension is granted, the industry continues to grow, and costs for renewable systems continue to decrease.

Current programs or exemptions have had significant results. Wind and solar-powered industries received much-needed assistance during periods when several consecutive years of federal energy tax credit had been extended. One year, nearly one third of all United States power capacity was added in the wind sector. Another year, this sector increased by nearly half. Solar tax credit also helped enable the solar sector to grow significantly. Plans for more large solar power projects are in development. These will either be shored up or stunted by future plans for extension or removal of credits. Advocates for extension of federal credits point to the additional jobs created by these facilities as further evidence that they are an appropriate economic bonus as well. The decisions which need to be made by government officials are complicated and may have long-term, widespread effects. This may especially be true in areas of fuels and energy use, which have an impact upon food supplies, natural resources and relationships between nations. No wonder Paul urges Timothy and other believers that "...supplications, prayers, intercessions and giving of thanks, be made for all men; For kings, and for all that are in authority; that we may lead a quiet and peaceable life in all godliness and honesty..." (I Timothy 2:1-2). Christians can pray that leaders will be guided to make decisions which are beneficial to all members of an increasingly inter-related world.

In the meantime, green buildings credits and efficient appliances credits remain the most commonly employed forms of assistance. No doubt there are many people who would be quite interested in investing in renewable energy systems for their personal or business use, but the up-front costs make it impossible to do so at this time. For this reason, further federal energy tax credit or solar tax credit may be the answer for this problem. It would also be helpful to advertise the existence of incentives and programs which offer assistance in procuring these renewable systems. Actually, most people are probably unfamiliar with the various products which are available for purchase by the public. Although there are doubtless many websites devoted to such items, perhaps a more widespread campaign utilizing television programs or commercials would be helpful in order to bring this information into public awareness. Such projects add long-term value to a home or business, while lowering costs and providing additional clean energy. Those are three incentives which will remain constant regardless of government policies.

Claiming Child Tax Credit

Taxpayers claiming child tax credit may be eligible to deduct up to $1,000 per qualifying child. Depending on a taxpayers income, marital and filing status, the government may allow a sizeable deduction for each eligible dependent under the age of 17 at the end of the year. To qualify, in addition to being under age 17, children must be related to the taxpayer by birth or marriage, by adoption, or as a foster child of qualifying parents. Not only do sons, daughters, and foster kids qualify, but taxpayers brothers, sisters, stepbrothers, stepsisters, or their descendents can also be claimed. Parents with dependent nieces and nephews; blended families raising stepchildren, or older adults, up to a certain age, who rear grandchildren may all benefit by claiming child tax credit. Qualifying dependents must be citizens, nationals or residents of the United States and must have resided in the taxpayer's home for at least six months out of the year. In addition, children who qualify must receive over half of all monetary support from the taxpayer claiming a deduction.

In today's economy, raising children can blow anybody's budget. Parents, grandparents, and foster parents not only shoulder the hefty responsibility of paying for education, food, clothing, and housing; but children also need quality healthcare, dental care and insurance. Most families depend on two incomes just to meet monthly household expenses; and paying for daycare while Mommy works has become the norm rather than the exception. While many advocate families having fewer children, the Bible views childbearing in an entirely different light. "Lo, children area an heritage of the Lord: and the fruit of the womb is his reward. As arrows are in the hand of a mighty man; so are children of the youth. Happy is the man that hath his quiver full of them: they shall not be ashamed, but they shall speak with the enemies in the gate" (Psalms 127:3-5). Thanks to the federal government's Child Tax Credit (CTC), families with single or multiple dependents can reduce the amount of taxes owed or qualify for a refund. While the CTC was legislated to give predominantly low- to middle-income families claiming child tax credit a break; the deduction is limited by their modified adjusted gross income (AGI). The AGI for married couples filing jointly cannot exceed $110,000. If couples decide to file separately, neither spouse's income can exceed $55,000. Other qualifying taxpayer AGIs are limited to $75,000.

Taxpayers claiming Child Tax Credit greater than the amount of tax owed may claim the difference as an Additional Child Tax Credit; however the total amount of deductions claimed for the CTC and Additional CTC cannot exceed a maximum amount, usually $1,500. Taxpayers with qualifying children use Form 1040 or 1040A when claiming deductions. For detailed information on computing and filing, taxpayers may log onto the Internal Revenue Website at IRS.gov or call 800-TAX-FORM. Publication 972, a lengthy 17-page document, explains qualifications and instructions for filing in detail. More abbreviated instructional brochures can also be downloaded from the IRS website.

Another legislation designed to help low-income employed taxpayers is the Earned Income Tax Credit (EITC). Originally approved by Congress in 1975, this credit was designed to help alleviate Social Security tax burdens and offer low income individuals an incentive to seek gainful employment. Because of taxes imposed on employees who work, many individuals on public subsistence feel that they fare better by remaining on government assistance. However, the EITC does not prevent individuals from receiving specific welfare benefits, nor does the EITC impact eligibility for food stamps, Medicaid, Supplemental Security Income (SSI), low-income housing, or specific Temporary Assistance for Need Families.

While the Child Tax Credit is designed specifically for families, childless workers may qualify for Earned Income Tax Credit if they meet certain requirements. Many low income wage earners miss out on EITC benefits simply because of an erroneous belief that they must have children in order to claim a legitimate EITC deduction. But low-income workers with a valid Social Security number and proof of earned income from 9-to-5, part time, or self-employment can meet basic qualifications. Employees seeking to file for EITC must be full year U.S. citizens or resident aliens. Non-resident aliens married to U.S. citizens or resident aliens filing jointly also qualify. In addition, qualifying individuals must be between the ages of 25 and 65 by the end of the year. However, they cannot qualify as another taxpayer's dependent, or as the qualifying child of another person. Special EITC rules also apply for military personnel, members of the clergy, and those who receive disability retirement income. IRS.gov gives detailed information about each of these special categories.

Individuals seeking to file for Earned Income Tax Credit can check for eligibility online via the EITC Assistant. Employees who qualify for EITC on federal returns are also advised to investigate whether a state of residence also offers EITC. IRS.gov features links to state websites with more detailed information on how to qualify and file for Earned Income Tax Credit. Many taxpayers may qualify for significant deductions by claiming a Child Tax Credit or Earned Income Tax Credit; but it is up to the individual to search for opportunities to reduce taxes or receive refunds. Every dollar saved can go toward improving the life of a little one. A thorough online investigation of federal and state government websites may reveal even more opportunities for low-income wage earners to offset the high cost of childrearing and reduce taxes.

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