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What You Need to Know About the Expansion of Tax Credits for Home Builders

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The U.S. government is taking significant steps to promote energy efficiency in the construction industry while stimulating economic growth. One of these measures is the expansion of tax credits for home builders who construct energy-efficient homes. Join the eFile360 team as we dive into the details of these tax credits and their implications for business owners in the home building sector. Understanding Tax Credits for Home Builders In an effort to incentivize the construction of energy-efficient homes, the government has introduced tax credits specifically tailored for home builders. These credits provide financial incentives to builders who adhere to specific energy efficiency standards in their construction projects. By taking advantage of these tax credits, builders can reduce their tax liabilities, improve the return on their investments, and contribute to a greener future. What is the New Home Construction Tax Credit? One of the key tax credits available to home builders is the New Home Construction Tax Credit. The exact amount of the credit may vary depending on factors such as the size, location, and energy efficiency of the homes being constructed. This credit is designed to reward builders and new homeowners who prioritize energy efficiency in their construction projects. To qualify for this tax credit, builders must ensure that the homes they construct meet specific energy efficiency standards. These standards may include criteria such as minimum insulation requirements, the use of energy-efficient appliances, and the integration of renewable energy sources. By adhering to these standards, builders can not only benefit from the tax credit but also attract environmentally conscious homeowners who value energy efficiency and sustainability. The Benefits of Tax Credits for Home Builders The expansion of tax credits for home builders brings a wide range of benefits to both builders and the overall economy. Let's explore some of these …

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Business Tax Implications of the Inflation Reduction Act

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Since the Inflation Reduction Act passed on August 16, 2022, businesses of all sizes have asked, “What does this mean for me and my business?” From energy-related tax credits to tax provisions for startups, we’ll dissect the Inflation Reduction Act in simple terms and what it specifically means for your business.  Clean Energy Tax Credits Electric Charging Stations Before January 1, 2022, businesses could install electric charging stations and receive a tax credit. The Inflation Reduction Act of 2022 extends the credit to charging stations installed and put in service before January 1, 2033. Commercial Clean Vehicles The Act also provides a tax credit – covering 30% of purchase costs – for businesses that utilize commercial clean vehicles, such as electric cars and fuel cell vehicles. This tax credit is available for those vehicles placed in service after December 31, 2022. Energy Efficiency Businesses can also take advantage of a tax credit to help them pay for energy efficiency improvements. The tax credit is worth up to $5 per square foot. Solar Power The Inflation Reduction Act offers businesses a tax credit that covers 30% of the cost it takes to switch to solar power. Manufacturing The Act offers tax incentives for manufacturers using U.S.-sourced materials to manufacture clean energy technologies, including solar, wind, clean hydrogen, and carbon capture. This will also help create U.S. jobs with fair wages and stimulate U.S. supply chains. Economies The Inflation Reduction Act establishes a Clean Energy and Sustainability Accelerator to finance state and local clean energy financiers, aiding the implementation of distributed zero-emission systems like heat pumps, community solar, and electric vehicle charging stations. This accelerator was also created with the intention of helping startup clean energy businesses, with a focus on supporting disadvantaged communities. Agriculture The Act expands the Rural Energy for America Program, …

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6 Small Business Tax Credits

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In a previous blog article, we covered everything you need to know about tax deductions. Today, we’ll talk about small business tax credits and offer some tips for taking advantage What Is a Tax Credit? A tax credit is a dollar-for-dollar reduction. NerdWallet explains “A few credits are even refundable, which means that if you owe $250 in taxes but qualify for a $1,000 credit, you’ll get a check for $750.” This is different from a deduction, which is a dollar amount you can subtract from your adjusted gross income. There are two types of tax credits, according to the IRS: Nonrefundable: tax credits where you get a refund only up to the amount you owe Refundable: tax credits where you get a refund, even if it’s more than what you owe Let’s go through some tax credits for the self-employed, including a few that have emerged in response to the coronavirus pandemic. Earned Income Tax Credit (EITC) The Earned Income Tax Credit is determined by income and is designed to help low- to moderate-income workers and families lower their tax burdens. To qualify, you must be between the ages of 25 and 65, be filing as an individual or married filing jointly, and be considered a low-income filer. Small Business Healthcare Tax Credit The Small Business Healthcare Tax Credit offers up to 50% in credits for “costs paid for premiums purchased through the Small Business Health Options Program (SHOP) plan for ACA coverage,” according to Zenefits. This tax credit is for businesses with fewer than 25 employees whose average salary is $50,000 or less per year. American Opportunity & Lifetime Learning Credits The American Opportunity Tax Credit is a credit for “qualified education expenses paid for an eligible student for the first four years of higher education.” The maximum annual credit is $2,500 per eligible student, which includes people whose modified adjusted gross income is $80,000 or less ($160,000 for married couples filing …

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Deductions 101 for Small Business Owners

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Every small business owner knows that they need to take advantage of deductions around tax time, but what are deductions? And how are they beneficial?  Deduction Basics A tax deduction is a reduction of taxable income based on certain business-related expenses that you can claim on your taxes, such as rent, business-related subscriptions, and travel.  Put simply, deductions can reduce your business’s total amount of taxable income. By claiming a deduction on your business taxes, you end up paying less to the federal government.  Tax deductions are also called “tax write-offs” or “write-offs.” Deductions vs. Tax Credits A tax credit is an incentive for a business to strengthen the economy, enhance people’s lives, improve society, and improve its industry in some way. Tax credits are offered by the government in an effort to reward businesses for doing good in their community and in the U.S. at large.  In short, deductions are based on expenses while tax credits are based on societal improvements. Deductions reduce the total amount of income that your business is taxed on while tax credits reduce your tax bill.  Tax credits benefit businesses dollar for dollar, while deductions benefit businesses by a percentage depending on your tax bracket. In general, tax credits are more valuable to businesses in lower tax brackets, while deductions are more valuable to businesses in higher tax brackets.  Both deductions and tax credits can help your business pay a smaller tax bill, so it’s important to work with a tax preparer to ensure you’re taking advantage of all of your options. Unsure where to start? We cover that here. To learn more about tax credits, read this article by FreshBooks.  Is There A Master List of Deductions? Surprisingly, the IRS does not have a master list of small business tax deductions. Instead, they provide a general rule of thumb for small business owners: To be deductible, a business expense must be both ordinary and …

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