Khaas Baat : A Publication for Indian Americans in Florida


Year 2023-Go Green and Claim Credits


There is a big difference between a tax deduction and tax credit. Simply put, a tax deduction will reduce your taxable income while a tax credit will reduce the actual tax-dollar to dollar. That is the reason it is worth exploring the credits that will reduce your tax burden. We have discussed here some credits, which were in effect before January 2023, but which are modified/expanded for 2023 and beyond. Inflation Reduction Act (IRA) passed in August 2022 covered these credits.

Credit for Renewable Energy:
The break for adding solar panels and the like to your home is extended through 2034. Individuals get a tax credit for installing an alternative energy system that relies on a renewable energy source, such as solar, wind, geothermal or fuel cell technology. The cost of wind turbines, solar panels, solar electric equipment and solar-power water heaters is eligible for the credit, whether they are installed in a primary residence or vacation home. Starting in 2023, the credit is expanded to cover battery storage technology installed in your residence. The credit equals 30 percent of the cost of the equipment and installation for 2022 through 2032. It falls to 26 percent in 2033, 22 percent in 2034 and ends after 2034.

Credit for Home Improvements:
Compared to 2022, credit for adding energy efficient improvements to your home is bigger and better for 2023 through 2032. The credit applies to 30 percent of the cost of certain types of insulation, plus external windows, doors and skylights. The credit also includes 100 percent of the cost of electric heat pumps and water heaters, some central air-conditioning systems, and similar energy-saving investments. There is a $1,200 annual limit, but some items have a higher or lower limit. For example, the yearly credit can’t exceed $600 for exterior windows and skylights; $600 for central air conditioners; $600 for natural gas, propane or oil water heaters, furnaces or boilers; or $500 for exterior doors. The annual limit increases to $2,000 for a biomass stove or biomass hot water boiler, or electric or natural gas heat pump. You can also take credit for up to $150 of the cost of a home energy audit.

Credit for Electric Vehicles (Clean Vehicle Credit):
Electric vehicles that are bought and placed in service can take federal income tax credit on 1040, ranging from $2,500 to $7,500. The MSRP can’t exceed $55,000 for sedans or $80,000 for vans, SUVs and pickups. Fuel cell vehicles qualify. The credit is not available to taxpayers with modified adjusted gross incomes over $300,000 for joint filers, $225,000 for household heads and $150,000 for others. The 200,000 plug-in-sales threshold limitation on manufacturers is removed. And buyers of certain used electric vehicles can get a credit equal to the lesser of $4,000 or 30 percent of the car’s sales price, provided the buyer’s modified AGI isn’t over $150,000 for joint filers, $112,500 for heads of household or $75,000 for all other filers.

One big change begins in 2024: The option for the buyer to monetize the credit by transferring it to the dealer at the time of purchase, thus lowering the amount that the buyer pays for the car. This allows buyers to take immediate advantage of the tax credit instead of waiting for the next year, when they file their tax returns. There are no guidelines provided yet about income threshold verification by the auto dealership. Leaving the credit calculations to the dealers will lead to chaos, miscalculations, and some unwelcome surprises at the tax time. There is still time for 2024, so we will see.

Tejal Dhruve, CPA, LLC, a full-service tax and wealth management firm with offices in Wesley Chapel, Florida, and Dublin, Ohio, can be reached at (614) 742-7158 or email info@dhruvecpa.com


Estate Planning for Newlyweds


Estate planning might sound like something only your wealthy great-uncle Frank has to worry about. You may wonder how your worldly possessions could possibly qualify as an “estate.” Believe it or not, almost everyone needs to take care of some basic estate planning, especially newlyweds. Most newlyweds don’t want to think of the possibility of losing their spouse, but the fact is that losing your spouse could be an even worse experience without the proper estate plan in place.

If you only do the bare minimum of estate planning, make it a will. In your will, you can leave your property to your spouse or whomever else you’d like. You should also determine secondary beneficiaries in the event that both of you die at the same time. Your will should name a designated executor, the person responsible for making sure your wishes are carried out.
Without a will, your property is at the mercy of your state’s laws. Depending on which state you live in, this could leave your spouse out in the cold. Additionally, if you have children, your will should designate guardians in case you and your spouse die at the same time.

Avoiding Probate
While creating a will is a great first step in estate planning, it cannot help you avoid probate. Probate is the process of executing a will, and it can take months or even years, and cost up to 5 percent of the value of the estate. The time and money involved in probate is probably not what you had in mind for your beneficiaries. If you live in a community property state, your property will automatically transfer to your spouse at the time of your death (unless noted otherwise in your will or prenuptial agreement). In a common law state, however, you’ll have to make sure that you and your spouse hold large property in “joint tenancy with right to survivorship.” This will ensure that your spouse automatically acquires ownership upon your death.
Another method of avoiding probate is the use of living trusts. A trust is a separate legal entity that holds property, so anything within a trust is exempt from probate upon your death. Marital trusts are trusts that address the specific needs of married couples. There are several types to choose from, with options for various circumstances.

Prenuptial and Postnuptial Agreements
A prenuptial agreement is a contract made between two people before their marriage begins. A postnuptial agreement, as the name suggests, is created after the marriage takes place. Both agreements generally specify what property is held While creating a will is a great first step in estate planning, it cannot help you avoid probate by each party prior to marriage and how that property will be divided in the case of divorce or death of one spouse. Prenuptial and postnuptial agreements are especially useful for couples where one party owns a business, has children outside the marriage or has considerable property from before the marriage. These agreements can be helpful in determining property ownership, especially for couples living in a community property state who do not want all property evenly divided, or vice versa.

Beneficiary Designations
Certain property can be passed directly to beneficiaries without the use of a will or trust. For instance, life insurance benefits, retirement plans and bank accounts can all be left to your spouse when you die, as long as you name him or her as the account beneficiary. When you designate a beneficiary, your account becomes “payable on death,” thus avoiding probate court and fees. If you don’t want to leave an entire account to your spouse, you can split up the assets among various beneficiaries. It’s also a good idea to list secondary beneficiaries in case the primary beneficiary also dies. Naming beneficiaries on your accounts is fast and can be done without the help of a lawyer.

Living Wills
Your estate plan is not only a plan for your death, but also in case you were to become incapacitated. It’s important to determine what should happen to you and your property if you become unable to communicate or make decisions for yourself. A living will can specify health care treatments you do and do not want, and how you’d like to be treated in the hospital. For instance, do you want to be kept on life support? Do you want to be fed through a tube if necessary? Will you donate your organs? When and if the time comes, you won’t be able to answer these questions yourself. Avoid putting the decision-making burden on your spouse by listing your wishes in a living will.

Your estate plan should also include a power of attorney designation, which is the person to make decisions for you if you become unable to do so yourself. You’ll probably assign your spouse with power of attorney, because he or she is most likely to know your wishes. Even if you have a living will, your power of attorney can make decisions that aren’t specified there. For instance, the power of attorney can make financial decisions such as paying your bills or managing your money. You can invoke the power of attorney even if neither spouse becomes physically or mentally incapacitated — if one of you is out of town, for example, the other can sign important documents and make decisions on his or her behalf.

There are two major myths about estate planning. The first is that it is a grueling, depressing process. Getting your estate in order does not have to be difficult to complete. If you are relatively young and have a small estate, the process should be quick and can even bring couples closer to each other. The other myth is that your estate isn’t large enough to warrant an estate plan. If you’d like to override the state laws pertaining to property ownership, or if you’d like to ease the burden on your spouse in the event of your death, estate planning is definitely for you.

This article was written by Advicent Solutions, an entity unrelated to Prudential. Material is provided courtesy of Prudential Advisors. “Prudential Advisors” is a brand name of The Prudential Insurance Company of America and its subsidiaries. Prudential and its representatives do not give legal or tax advice. Please consult your own advisors regarding your particular situation. ©2019 Advicent Solutions.

Seema Ramroop, financial planner at Prudential Advisors, can be reached at (813) 957-8107 or email seema.ramroop@prudential.com

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