Announcer:
It is time now on KROS for Financial Focus, brought to you by NelsonCorp Wealth Management. The opinions voiced in this show are for general information only and are not intended to provide specific advice or recommendations for any individual. Any indices mentioned are unmanaged and cannot be invested into directly. Registered representative securities offered through Cambridge Investment Research Incorporated, a broker, dealer member FINRA, SIPC, investment advisor representative Cambridge Investment Research Advisors Incorporated, a registered investment advisor. Cambridge and NelsonCorp Wealth Management are not affiliated. Cambridge does not offer tax advice. Now, here’s today’s Financial Focus program.
Nate Kreinbrink:
Good morning, and welcome to this week’s Financial Focus brought to you each and every Wednesday morning right here on KROS. This is Nate. We’ve got Andy Ferguson joining us today. Going to talk some taxes, but hard to believe this is the last show in September. It’ll be October next week already.
Andy Fergurson:
Yeah, the summer is over. We’re right up against the new tax or the last tax deadlines. It’s fall. The nights are longer than the days at this point, and it’s crazy.
Nate Kreinbrink:
And we were talking on the way up here, there’s only four regular-season Major League baseball games. That season is pretty much over, which-
Andy Fergurson:
It’s good for us.
Nate Kreinbrink:
… probably is a good thing for the Cardinals fans. Those fighting for those last couple playoff spots, though it’s going to be probably coming down right to the last game or two, because I know there’s American League nationally, a couple that are, they’re pretty close as far as who’s going to get in.
Andy Fergurson:
Yeah, we’ll see if we can’t play spoiler.
Nate Kreinbrink:
You’re going to play spoiler. But no, hard to believe we are this way. You guys had a homecoming in Clinton. Comanche, oh, had it last week. Fulton’s already had theirs. Northeast has it coming up in a couple of weeks. So again, that time of the year, fall season, Halloween season is in there.
Andy Fergurson:
Oh, my gosh.
Nate Kreinbrink:
Everything’s here.
Andy Fergurson:
I saw Christmas stuff at Walmart.
Nate Kreinbrink:
I don’t even want to go that far.
Andy Fergurson:
Christmas stuff up at Walmart. I was like, “We’re in September. How come there’s Christmas stuff?”
Nate Kreinbrink:
We have October, or we have Halloween. We have Thanksgiving before we even…
Andy Fergurson:
Yeah. Yeah. Well, it’s crazy.
Nate Kreinbrink:
It’ll be here, though, before we know it. But again, getting into this, I know the last month when you were on, you had just gotten back from Washington, DC, from a tax conference, and you had a whole list of different topics to kind of get through. The last time we were talking as far as Venmo and PayPal and that type of stuff, as far as you’re going to need to keep track of that, and again, how that changes? And as far as from what it was expected to last year to what is going to be required of individuals this year, want to kind of continue on that path with some other key topics that kind of came out of that. And some things that you have read over the timeline, I guess one of those is the solar tax credits and solar energy and how that is coming into play. Not that it always hasn’t been there, but again-
Andy Fergurson:
It changed, though, so it’s important to talk about. And what we’re going to talk, it’s the expanded energy credit program, and there are two parts to it. There’s residential energy credits, so that’s going to be credits for new doors, new windows, new siding or insulation, those types of things. Maybe heat pumps or boilers, or biomass burning units, those types of things. All fall under that expanded energy credit for residential. So the changes that exist there is that used to be like for your windows, you used to be able to get a lifetime credit of $500, and that would be basically you put in one new window, you get the credit, you’re done. I mean, it was over. It might’ve taken two windows to get enough of a percentage-
Nate Kreinbrink:
To get the 500.
Andy Fergurson:
… to get that credit. So a lot of people, once they got that credit and they knew it was a lifetime credit, they stopped worrying about it.
Well, the new law, the Secure Act 2.0, changed that to where now there’s a credit that exists where there’s an annual limit instead of a lifetime limit. And so there’s an annual limit for doors. There’s an annual limit for Windows. There’s a total annual limit, there’s an annual limit per door, per window. So there’s just a lot of moving pieces there. And it can be one of those things where, if you’re doing your whole house, there might be an advantage to spreading it out over two years, doing it December and January, or maybe even an advantage to doing it over time, doing four or five windows this year and four or five windows the next year, and four or five windows the next year. Just because those credits come into play and give some additional advantage. If you plan it correctly, there can be advantage there.
So that’s the residential energy credit side, and then there’s the residential clean energy. So this is going to be the benefits to installing major energy production sources like solar, wind, geothermal. These are the big credits, right? When you put in geothermal or solar, or wind production arrays, what ends up happening is you’re putting in a $26,000 outlay, and that $26,000 outlay gets you a percentage back in a credit. And the salespeople that are selling these things are well aware of the credit that’s available. They know exactly what the percentage is. They even have financing products that are related to how much credit you’re going to get. So they’ll go in there or they’ll come to your house and say, “It’s going to cost you this much, but we’ll give you a loan that, when you get this credit, this credit will work towards this loan,” and blah, blah, blah, blah, blah. Well, that’s all well and good if the credit works out the way you think it will.
Nate Kreinbrink:
Exactly.
Andy Fergurson:
What’s important to understand about that credit? Well, first of all, the changes are… In 2023, the old law would’ve dropped this solar credit down to 22%, where it had been at 30% in 2022. The Secure Act put it back up to 30%. It stays at 30% now for the next 10 years, and so it’ll be 30% for the next 10 years for these large systems that are put into place in the tax year. The other thing that is important to understand is that that credit is non-refundable. What that means is you have to have enough tax to consume the credit. So it’s not like the child tax credit or maybe some of the college credits that you get, the American Opportunity Tax Credit. Some of those credits are refundable, which means if the credit exceeds your tax, the government will give you the overage, right? It’s a refundable credit.
Non-refundable credits are more like a foreign tax credit, or other college credits are non-refundable or the other dependent credit. Those credits are non-refundable, which means if you don’t have the tax, you don’t get the credit. So it’s important to know… With these credits, especially because they’re big credits, if you’re expecting a seven or $10,000 credit, you need to make sure that you’re going to have seven or $10,000 worth of tax if you’re expecting that credit in one year. The good news is if you don’t have that much, so if you’ve got a $10,000 credit but you only get $7,500 in tax, you’re not going to lose the other 2,500. You’re just not going to get it this year.
Nate Kreinbrink:
This year.
Andy Fergurson:
It’s going to carry forward. You’re going to get it at another time, but it’s not going to come this year and allow you to work it towards that bank product that you worked out with the solar people. So it’s just important to know where your situation is because they don’t know the people that are selling you this solar panel array. They don’t know what your tax situation is, and so you just need to call somebody and make sure that you’re in the right spot.
Nate Kreinbrink:
So again, I think it all comes down to, as you’re doing your preparer, you need to let your tax preparer know. I mean, whether you put new windows and new doors, you’re thinking solar, you’re thinking whatever. Do that planning ahead of time, just like everything else, and make sure you understand, again, not just the general information but how it definitely applies to your individual situation. I know another term that you keep bringing up and referencing, and I ask you, is this something new? Is this something that just came about taxpayer advocate? And it may be explained just briefly as far as-
Andy Fergurson:
Sure.
Nate Kreinbrink:
… what that is and how and what it’s main purposes, I guess, for individuals?
Andy Fergurson:
Yeah. So the taxpayer advocate, first of all, it’s not new. It’s an organization that is a government-funded organization, and their role is to protect the taxpayers’ rights with regard to their interactions with the IRS. So the IRS is an intimidating entity to deal with, and people sometimes call the IRS, and the IRS is like, “Hey, this is what’s going to happen.” And people just kind of take it and like, “Okay, whatever you say, we’ll do.” And they don’t always know what their rights are and what should happen. And sometimes I don’t think it’s ever malicious necessarily on the part of the IRS, but sometimes the IRS doesn’t always follow through on their end. It’s an organization made up of people, right? And people have shortcomings. And so what the advocate is, it’s another tool available to the taxpayer that allows them to have an advocate, somebody on their side that can interact with the IRS, who’s used to interacting with the IRS, who can see into the IRS’s system and can get them some answers, especially in a time when it’s hard to even sometimes get through and talk to somebody in the IRS.
I’ve had a lot of people that I’ve referenced to the taxpayer advocate, and they’ll have this issue where maybe they made a payment and that payment was applied to the wrong year, and so then it created a tax liability and all this stuff. And it’s just hard to straighten that out if you don’t really know what you’re talking about. And they make a call into the advocate. The advocate takes their case on, they get a personal caseworker, somebody they can connect with directly. That person says, “You know what? I’m going to fix this for you.” They get a hold of the IRS, or they work through the IRS’s system, and they correct the issue. They get the money moving back the way it needs to be so that that person is made whole under their rights through the taxpayer bill of rights. And so it’s a valuable tool that a lot of people don’t know exists. It’s been around for years and years, and when I mentioned it to you, you’re like, “What is that? I’ve never even heard of that.”
Nate Kreinbrink:
I’ve never heard of it.
Andy Fergurson:
So it was something, they go to our seminars every year, and they want to get the word out to let people know that they exist.
Nate Kreinbrink:
So again, getting into October 2, that also brings the final tax deadline, and main effect, we meet the third Wednesday of every month to discuss taxes that will be past the deadline. So again, people need to realize that if they filed an extension, if they have anything due by then, that’s coming really quick as well.
Andy Fergurson:
Yeah, the tax deadline is 10/15, and it’s 10/15 for everybody. So the people that have brought me their stuff already, their stuff’s going to be done by 10/15. The people that bring me their stuff on 10/14, it may not be done by 10/15. Right? Because everybody, it’s going to go in the order that we get it. So don’t wait till the last day just because that’s the last day. You got to get it in and give your guys some time to get it done.
Nate Kreinbrink:
Again. Did want to say that this thing goes really quick. We’ve got a couple more topics. We’ll push those over to next week, continue talking taxes.
Andy Fergurson:
Sure.
Nate Kreinbrink:
And work through that whole list. And by that time, you’ll probably keep adding to this list.
Andy Fergurson:
I think I can probably keep you going for weeks on it.
Nate Kreinbrink:
Oh my God. Did want to mention real quick here, though, before we run out of time, that every Friday, NelsonCorp Wealth Management and NelsonCorp Tax Solutions are wearing jeans for charity. Money raised in the month of September will be donated to the Living Peace 365 organization here in Clinton. Again, this is Nate and Andy bringing you this week’s Financial Focus. Thanks for tuning in, and have a great rest of your week.
Announcer:
Financial Focus is a production of NelsonCorp Wealth Management in Clinton and Davenport. The opinions voiced in this show are for general information only and are not intended to provide specific advice or recommendations for any individual. Any indices mentioned are unmanaged and cannot be invested into directly. Registered representative securities offered through Cambridge Investment Research Incorporated, a broker, dealer member FINRA, SIPC, investment advisor representative Cambridge Investment Research Advisors Incorporated, a registered investment advisor. Cambridge and NelsonCorp Wealth Management are not affiliated. Cambridge does not offer tax advice. For more information, visit our website at www.nelsoncorp.com.