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183eej
Registered Users
Posts:61
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| 10/04/2008 3:33 AM |
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I suspect by now everyone has heard that Congress passed and the President today signed the bailout bill officially referred to as the "Emergency Economic Stabilization Act of 2008." That was division A of the package that was made into law today.
There was a Division B of the bill and it is officially referred to as the "Energy Improvement and Extension Act of 2008." This is significant for the geothermal business because it includes a 30% tax credit up to $2,000 for a single filer and up to $6,667 for what is referred to as joint occupants. I presume this means a married couple and other...er...co-habitants. The tax credits will also be retro-active back to January 1st of this year so there is no reason for customers to wait until the act becomes effective. It is effective today.
I have read DOE studies regarding the projected impact on geothermal sales of the renewable energy rebate included in the 2005 Energy bill that was never funded by Congress. The rebate was 30% capped at $2,278 for geothermal in the first year and the model showed a projected increase in geothermal installs going from 35,000 units to 169,000 in the first year.
That is a 5 fold increase in unit sales which is stunning. I would expect most of the geothermal installs to be for "joint occupants" so a $6,667 tax credit will triple the incentive that was assumed for the rebate study. If DOE's projection model is any good and still a viable model for a tax credit as opposed to a rebate, a tripling of the incentive logically might triple the projected unit sales, which puts geothermal sales in the 500,000 unit range. If this model is only half true, this means people in the geothermal business have a brand new problem. A nice problem to have but a problem nonetheless. |
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Dale Walker
EarthTap Energy
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senecarr
Registered Users
Posts:158
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| 10/04/2008 11:12 AM |
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This actually worries me that it will induce a lot more hacks into the field.
It's nice to see the credit, but if it's anything like the parts I read about the previous senate energy bill, I'm afraid it's not as help to me as I might like.
I'm going to have dig and see if it's refundable or not. |
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doctj
Registered Users
Posts:13
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| 10/04/2008 11:15 AM |
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Great news, how do I apply for a tax credit? I don't need to wait till I file my taxes next year?. Thanks
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183eej
Registered Users
Posts:61
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| 10/04/2008 12:55 PM |
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Posted By senecarr on 10/04/2008 11:12 AM
This actually worries me that it will induce a lot more hacks into the field.
It's nice to see the credit, but if it's anything like the parts I read about the previous senate energy bill, I'm afraid it's not as help to me as I might like.
I'm going to have dig and see if it's refundable or not. You are probably right about the hacks. If there is money to be made, people will gravitate towards it. It would be nice if the state licensing boards required independent commissioning of geothermal systems to ensure they work properly before the customer released final payment.
I'm not understanding refundable in context of the tax credit. How does that work?
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Dale Walker
EarthTap Energy
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183eej
Registered Users
Posts:61
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| 10/04/2008 1:00 PM |
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Posted By doctj on 10/04/2008 11:15 AM
Great news, how do I apply for a tax credit? I don't need to wait till I file my taxes next year?. Thanks
The tax credit should be a line on next year's tax return. In order to take the credit, the system has to be installed and paid for by December 31st of the tax year. So, if you get a geothermal system installed and paid for this year, you can take the credit as soon as you file your tax return next year. It's more valuable than a tax deduction because a credit is a dollar for dollar reduction in taxes owed. Whereas a tax deduction reduces the amount of income that is subject to taxes.
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Dale Walker
EarthTap Energy
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senecarr
Registered Users
Posts:158
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| 10/04/2008 1:19 PM |
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Posted By 183eej on 10/04/2008 12:55 PM
I'm not understanding refundable in context of the tax credit. How does that work?
There are two ways credits can go against taxes, refundable, and non-refundable. A refundable credit is better to the taxpayer because it can actually pay you money. A non-refundable, the usual kind, can only lower the amount of taxes you paid in. So if you made 50,000, had 15,000 worth of schedule A items on your insurance and 4 kids, your actual tax amount before credits might only be 1000 to 1500. So the most you can get from the credit is 1500.
Basically to use a whole 6,000 worth of credits, your income after deductions for a married couple (10,000 standard deduction, + 3400 for every family member) would have to be over 50,000. Basically for a 2 child family, they would need to make at least 73,600 in taxable income (so not income that goes in a 401K, or medical premiums) to utilize most of a 6,000 credit.
It may not seem like a huge amounts for 2 income earners, but I'm acutely aware as my wife is a stay at home mother currently. |
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geodean
Registered Users
Posts:590
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| 10/04/2008 3:15 PM |
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| The question is if you have a credit of $2000 and you owe $1500 in taxes, do you get a refund of $500. |
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Dewayne Dean
PalaceGeothermal.com
Why settle for 90% when you can have 400%
We heat and cool with dirt!
visit- http://welserver.com/WEL0114/- to see my system |
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senecarr
Registered Users
Posts:158
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| 10/04/2008 4:01 PM |
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Posted By geodean on 10/04/2008 3:15 PM
The question is if you have a credit of $2000 and you owe $1500 in taxes, do you get a refund of $500.
In the case of a non-refundable credit like this, the answer is no.
If it was refundable, then yes. So there are some people that won't see the full credit because their tax liability isn't high enough.
Luckily, this credit is taken before the child tax credit, so if you have children and this reduces you down to zero taxes, you'll get refunded more than you paid in because you'll be able to use the unused amount of the child tax credit as the additional child tax credit.
The whole thing is why articles always include the *Consult your tax professional on all tax matters.
I personally can already estimate what it looks like for me (I work making software for accountants and happen to know things about things for certain states better than actual accountants who work in said states :( ). A quick estimate says if the credit does go up to 6,000, it will bottom out my tax liability. Then I'll be reduced below zero taxes by the additional child tax credit. Not as great as getting the excess, but I'm still looking at getting back anything I've paid in plus 3000 because of 3 kids.
My concern about it is for people that for people at lower middle class, that could most use the savings the system could provide won't see the full credit amount. |
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senecarr
Registered Users
Posts:158
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| 10/04/2008 4:23 PM |
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Posted By geodean on 10/04/2008 3:15 PM
The question is if you have a credit of $2000 and you owe $1500 in taxes, do you get a refund of $500.
I guess I should also clarify that I'm taking owe to mean your total tax liability for the year, not simply what you might have to pay in.
I'm always amazed by that take less then their allowed payroll deductions so they get a "bigger refund" at the end of the year.
So assuming your tax liability for the was $1500, and you already paid $1500 in on your payroll withholding / quarterly estimates / what not, had 2,000 in geo-credit, you would get a "refund" for 1500, not 2000. The other 500 would be forefit.
Actually, look at the previous tax form, and the current bill applied to it, geothermal systems would be included in part 2, so the unused credit would carry forward to the next year to use up next year's liability until 2017 or the credit was cancelled by another act of congress. |
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senecarr
Registered Users
Posts:158
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| 10/04/2008 4:47 PM |
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| Also, looking through the rules, joint occupant does not mean married filing jointly. It explicitly says in the 2007 form married filing is not the same as occupying jointly. Occupying jointly is taken to mean at least 2 individuals sharing or co-owing a home (probably covers cases such as Co-ops or multi-unit homes). In any case, the maximum any one married couple or single individual may take is the 2,000. |
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tuffluckdriller
Registered Users
Posts:411
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| 10/05/2008 2:51 PM |
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| Can the remainder be carried forward into years to come? If so, how many years? This would be beneficial more than just a one-time shot where you'd lose the extra. |
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Clark Timothy (clark@pinksdx.com)
VP sales, Tuff Luck Geothermal Drilling
Geothermal, Heating and Cooling that's Dirt Cheap! |
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senecarr
Registered Users
Posts:158
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| 10/05/2008 3:04 PM |
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| It looks like the extra could carry-forward until 2016. |
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Dan Kramer
Registered Users
Posts:2
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| 10/07/2008 12:14 AM |
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| Would this credit apply to Air to air heat pumps as well? |
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183eej
Registered Users
Posts:61
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| 10/07/2008 8:02 AM |
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Posted By Dan Kramer on 10/07/2008 12:14 AM
Would this credit apply to Air to air heat pumps as well? It doesn't. The credit is a renewable energy credit which limits it to geothermal.
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Dale Walker
EarthTap Energy
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senecarr
Registered Users
Posts:158
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| 10/07/2008 8:49 AM |
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Posted By Dan Kramer on 10/07/2008 12:14 AM
Would this credit apply to Air to air heat pumps as well?
No. There should be a lesser credit though, based on HSPF for them.
Essentially the bill renews and expands the credits from 2006. You can look at http://www.irs.gov/pub/irs-pdf/f5695.pdf
for an idea.
In the case of Geo, however, it's being moved to part 2 and generally being treated like solar panel property.
An air source heat pump, however ,is treated like an energy efficient furnace and would have a maximum credit for 300. |
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a0128958
Registered Users
Posts:183
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| 10/07/2008 10:40 AM |
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Posted By 183eej on 10/04/2008 1:00 PM
... In order to take the credit, the system has to be installed and paid for by December 31st of the tax year.
And it was only a $300 deduction available for the 2007 Tax Year.
Best regards,
Bill |
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joe.ami
Registered Users
Posts:370
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| 10/07/2008 10:47 AM |
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Bill,
Don't despair. You've likely saved more than 2 grand by not waiting.
J |
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doctj
Registered Users
Posts:13
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| 10/07/2008 10:51 AM |
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Posted By senecarr on 10/04/2008 4:47 PM
Also, looking through the rules, joint occupant does not mean married filing jointly. It explicitly says in the 2007 form married filing is not the same as occupying jointly. Occupying jointly is taken to mean at least 2 individuals sharing or co-owing a home (probably covers cases such as Co-ops or multi-unit homes). In any case, the maximum any one married couple or single individual may take is the 2,000.
Are you sure about that? My wife and I are co-owners of our property who also file jointly. Why shouldn't we be eligible for the full credit?
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senecarr
Registered Users
Posts:158
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| 10/07/2008 11:12 AM |
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Posted By doctj on 10/07/2008 10:51 AM Posted By senecarr on 10/04/2008 4:47 PM
Also, looking through the rules, joint occupant does not mean married filing jointly. It explicitly says in the 2007 form married filing is not the same as occupying jointly. Occupying jointly is taken to mean at least 2 individuals sharing or co-owing a home (probably covers cases such as Co-ops or multi-unit homes). In any case, the maximum any one married couple or single individual may take is the 2,000.[/quote]
Are you sure about that? My wife and I are co-owners of our property who also file jointly. Why shouldn't we be eligible for the full credit?
The full credit is 2,000. There is a limit that one building maybe eligible for 6,667 if there are multiple tenancy - if you have a townhouse that installs it for example. In the case where a townhouse / condo set, some such has installations for the whole building, the building is eligible for 6,667, which must be split on a proportional spending basis. Then, even if your portion of 6,667 is more than 2,000, you are still limited to 2,000. Basically, if you want to get your full credit, don't split costs between four or more families on a geo or solar install.
Take a look at the 2007 form. It explicitly spells out that a married couple is not a joint occupancy. 2,000 is the maximum credit any individual or married couple can take. |
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doctj
Registered Users
Posts:13
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| 10/07/2008 11:58 AM |
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Posted By senecarr on 10/07/2008 11:12 AM Posted By doctj on 10/07/2008 10:51 AM Posted By senecarr on 10/04/2008 4:47 PM
Also, looking through the rules, joint occupant does not mean married filing jointly. It explicitly says in the 2007 form married filing is not the same as occupying jointly. Occupying jointly is taken to mean at least 2 individuals sharing or co-owing a home (probably covers cases such as Co-ops or multi-unit homes). In any case, the maximum any one married couple or single individual may take is the 2,000.[/quote]
Are you sure about that? My wife and I are co-owners of our property who also file jointly. Why shouldn't we be eligible for the full credit?
[/quote]
The full credit is 2,000. There is a limit that one building maybe eligible for 6,667 if there are multiple tenancy - if you have a townhouse that installs it for example. In the case where a townhouse / condo set, some such has installations for the whole building, the building is eligible for 6,667, which must be split on a proportional spending basis. Then, even if your portion of 6,667 is more than 2,000, you are still limited to 2,000. Basically, if you want to get your full credit, don't split costs between four or more families on a geo or solar install.
Take a look at the 2007 form. It explicitly spells out that a married couple is not a joint occupancy. 2,000 is the maximum credit any individual or married couple can take. That clarifies it. Thanks
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