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IRA Act - get ready for Energy Credits Confusion


BulldogTom

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It looks like this act has a good chance of passing now.   The most interesting/challenging for us as preparers will be the energy efficiency credits.   Lots of categories of improvements with different max credit amounts, and some of the credits come with regional income limits, and they will be able to be claimed in 2022.  The credits can be big (leading to abuse/fraud?).   I think I saw that you can get $14,000 for retrofitting your home electric panel and wiring if you qualify.   I see big headaches for us trying to get this figured out.   Get ready to take a few webinars on these provisions.  I read one article that says these credits might be able to be "stacked" year after year (so you can do some windows this year to max the credit, then do some more next year and get it again).   

If this passes, we have another couple years of job security (until Congress decides to "simplify" the returns again and then we will get more job security) s/

Tom
Longview, TX

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We were going car shopping next week, but I will just look and not buy until I see what credits come out of this. I'm very excited that our son finally talked my husband into something newer with more safety features. He had two incidents last year that made him realize that they could have been avoided if a computer paid better attention than him. 

 

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And, I've spent the last two days dealing with a client who thinks Obamacare provisions are unfair. I went so far as to call up the the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act at 974 pages, and told her to call her insurance agent. I told her it's a Health and Human Services issue and not the IRS. She got a distribution from a family partnership and will get another from their family's S-corp; at least one is due to selling buildings. She's on AccessHealthCT (CT's exchange) and qualified for APTC. So, I told her to contact AccessHealthCT with her new guesstimate for 2022 income. Her broker's insurance agent told her NOT to and wait until next April when she files taxes. I don't have time to learn about insurance, Medicaid, Social Security, etc., as well as taxes!

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Safety features are worth it.  We have a newer Jeep GC with all the bells and whistles.  The lane assist is fun-ish, but the auto cruise is what I use most.  Not perfect, as it can brake incorrectly on certain curves, but it is better to stop when not needed than too late. Thankfully, the platform was well vetted, shared with many other vehicles, so nothing major newly untested.  I was a bit reluctant, given my racing history, to believe I needed assistance, but I gave in to age...

But, we have a TJ Wrangler with nothing more than belts and bags, and is a manual, we have with door and top off for "fun" driving.

If Ford ever gets enough Mavericks so we can actually test one, we would likely trade the GC for the Maverick, to get the hybrid.  The platform is shared with other models, so like our GC, it is relatively well tested.

We are a but limited in what we buy as it needs to be able to be flat towed behind our MH.  And I do not like the latest and newest, I want something shared across models, and at least a year into their run.

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10 hours ago, Medlin Software said:

Safety features are worth it.  We have a newer Jeep GC with all the bells and whistles.  The lane assist is fun-ish, but the auto cruise is what I use most.  Not perfect, as it can brake incorrectly on certain curves, but it is better to stop when not needed than too late. Thankfully, the platform was well vetted, shared with many other vehicles, so nothing major newly untested.  I was a bit reluctant, given my racing history, to believe I needed assistance, but I gave in to age...

But, we have a TJ Wrangler with nothing more than belts and bags, and is a manual, we have with door and top off for "fun" driving.

If Ford ever gets enough Mavericks so we can actually test one, we would likely trade the GC for the Maverick, to get the hybrid.  The platform is shared with other models, so like our GC, it is relatively well tested.

We are a but limited in what we buy as it needs to be able to be flat towed behind our MH.  And I do not like the latest and newest, I want something shared across models, and at least a year into their run.

The Maverick brings back terrible memories. My dad bought a repo and it was the worst. I'm glad that they are bringing it back as a good vehicle. 

I am looking for a smaller or midsize SUV. I want something safer and good for Colorado roads when we finally get moved there. 

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Subaru Outback or Crosstrek drive like cars. The Forester drives like a truck. Crosstrek is the smallest if you're driving narrow, winding roads. After a Subaru DL wagon in the 80s, we're on our fourth Outback now. All our former cars are still on the road with other owners.

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21 hours ago, Lion EA said:

Her broker's insurance agent told her NOT to and wait until next April when she files taxes. I don't have time to learn about insurance, Medicaid, Social Security, etc., as well as taxes!

Probably good advice from a tax perspective due to the limits on payback based on % of FPL.  Insured are told to contact the marketplace if income changes, so be careful of ethics if recommending to wait. 

 

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I told her to contact the marketplace, and copied her on the page on AccessHealthCT that says the same thing. It's her broker who told her NOT to contact them.

She received $130,000 from one PT entity and is expecting in excess of another $195,000 from sale of a building in another PT. Her dad is Seattle runs the two PTs. We're in CT. Her hubby's on SS, so will have that taxable this year. Oh, and they're getting a life insurance policy payout in November in excess of $50 that her broker says will be taxed as ordinary income. One of their two dependents graduated in 2020, so is no longer a dependent. He's on their AccessHealthCT policy and earned about $50,000. I don't think their payback will be capped !!

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Vote-a-rama is happening now.  Looks like credits tied to EVs will also be tied to domestic content of the vehicles and batteries.   IRS will have to publish eligibility lists of vehicles that meet the domestic sourcing requirements for the credits.   Interesting twist.  @NECPA in NEBRASKAyou may be waiting a while before you get a good selection of vehicles to choose from.  The senators from Michigan predict it will take a couple years for domestic production of rare earth minerals to catch up to demand.

Tom
Longview, TX

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In the bill the senate just passed (making it likely to become law when the favorable house votes on Friday), it looks like the energy credits for EVs will be applied at the dealership--leaving tax pros and the IRS out of it.  YEA!!!  Of course, buyers will most likely have to provide the dealership with tax returns to verify AGI --not sure if I'd want to do that.  Also, they will only be able to provide the return from the prior year, and I don't know if the bill will determine eligibility for the credits on the prior or current year AGI.  Yes, we will have to learn a lot about the application of the law to explain to clients, but at least we don't have to determine if the car or buyer qualifies and calculate the credit.  This is a rare social policy initiative that congress hasn't dumped on the IRS; they too must be relieved.  Now if they would just get EITC out of the tax administration system and into social services where it belongs....

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On 8/6/2022 at 10:57 AM, Lion EA said:

Subaru Outback or Crosstrek drive like cars. The Forester drives like a truck. Crosstrek is the smallest if you're driving narrow, winding roads. After a Subaru DL wagon in the 80s, we're on our fourth Outback now. All our former cars are still on the road with other owners.

I love our son's Outback. I am going to look at those. I really like the Rav4 Prime or Hybrid,too. My sister has a Forester, so I can't have one. 😀

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11 hours ago, Sara EA said:

... it looks like the energy credits for EVs will be applied at the dealership--leaving tax pros and the IRS out of it. 

Also, they will only be able to provide the return from the prior year, and I don't know if the bill will determine eligibility for the credits on the prior or current year AGI. 

Not quite! They have to meet the MAGI limit for both the prior and current year.  And they just added a claw-back provision so that if a TP gets the dealer rebate, but don't meet the MAGI limit in the current year, they must pay back the rebate as an additional tax.  Of course, everything could still change, and the rebate provision doesn't start until 2024.

 

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