Finding Out About Your Tax Breaks and Credits Under Obamacare

Everybody knows about the healthcare website where you are supposed to sign up for the health insurance exchanges if you don't have adequate insurance.  But for individuals and businesses, those benefits have tax implications, like tax breaks and credits.  How do you find out about those in detail?  With the IRS, of course. The IRS has a page with links telling individuals and businesses about the implications of the Affordable Care Act.  There is also a Q and A page for individuals and businesses. 

For businesses, there is also an independent calculator to figure out the implications of the business tax credit on their taxes--and their employee's health coverage.  The Small Business Majority has a calculator that figures out a business's tax credit under the new law, based on the total payroll, number of employees, and the employer contribution. 

Tax Credits that Might Attract Investment Money to Your Business

Money is hard to find for new and expanding businesses, but some is out there.  One form of investment (remember: NOT free money.  Remember our motto:  if money were easy to get everybody would have lots of it) is “equity investment.”  Simply put, it means that an investor buys a part of your business in exchange for the infusion of cash.  This is opposed to a loan, in which money is loaned for a particular rate of interest.  Equity investments are riskier because while there is a legal guarantee of responsibility to pay the debt, equity investors may see their investment crash and burn without getting a penny.  How then, can the government make this more attractive?  By giving a tax credit.

 This is called “tax equity.”  As described by the U.S. Partnership for Renewable Energy Resources:

 

“’Tax equity’ is a term that is used to describe a passive ownership interest in an asset or a

project, where an investor receives a return based not only on cash flow from the asset or

project but also on federal and state income tax benefits (tax deductions and tax credits). Tax

equity investors are usually large tax‐paying financial entities such as banks, insurance

companies and utility affiliates that use these investments to reduce future tax liabilities. Tax

equity is distinct from traditional “corporate equity,” where an investor makes an active

investment and is actively involved in corporate governance.”

That’s what the state of Ohio is now offering for small businesses and investors.  The Department of Development unveiled InvestOhio, in which small businesses and investors come to an agreement about the size and nature of the equity investment (how much money, how much the investor owns of the company), and then they both register with the state to become eligible to take part in the program.  Then one of the parties will register the investment at the Ohio Business Gateway site and wait for the Department of Development to approve.  If they do, the investor must invest, and the small business in the partnership must purchase the materials funded by the investment within a six month period.  There are specific categories that are eligible to be purchased with the investment money.  For the tax credit to kick in, the invested company must hold onto the material for two years and the investor must likewise hold onto their investment in the company for two years.  In the future, starting in June 2013, that will extend to a five year period. 

For more details, see the Department of Development website or call 1800-848-1300.  If you run a business in another state your state might offer similar tax credits for your potential equity investors.   In 2010, the Office of Legislative Research for the state of Connecticut did an article on 21 states that offered tax credits to “angel investors,” with details on their plans.  All plans are different, with different goals and restrictions.  For instance, the Arkansas plan is aimed at high-tech businesses.  Maine and Virginia have different plans, too. To find out if your state offers this, check your state's development office.

Filing For Your 2010 Energy Credits? Energy Star Explains it All

For people in the dark about how much they can get in energy saving tax credits for the 2010 tax, year, Energy Star's website is way ahead of you.  They explain, on a couple of different tabs, both your available credits for 2011 (hint: they cut them back.  Unlike tax breaks for the wealthy, which apparently are sacred.).  There is also a tab to tell you how to file for your 2010 credits--how much you get, what forms to use, and what documentation like receipts and manufacturer's statements, if necessary.  It's worth checking out.

Finally--EITC Information for Tax Year 2009

I knew the IRS would come through if I waited long enough--the numbers you need to know for Earned Income Tax Credit qualification. I pussyfooted around in my last post because I could not find where the IRS was hiding the exact numbers for 2009, but here they are. If you have no children, and are filing single, you must make less than $13,440 in earned income ($18,440 if married and filing jointly). But if you have one "qualifying" child (see the IRS webpage), that figure jumps to $35,463 for singles (and $40,463 for married couples filing jointly). There is also a temporary increase in the EITC for tax years 2009 and 2010 because of the ARRA (stimulus act).

Resolve to Get Some Real Free Money

If you are a low income person with earned income, resolve to get some real money from the government this year. No, not from the “free money” losers on infomercials—from the earned income tax credit (EITC). It is the tax credit (NOT a deduction. It’s way better. A deduction just reduces the amount of your income the government can tax. A credit cuts down on your actual tax bill, and can create a refund—or sweeten the refund.) to help out low and moderate income people. In 2008, it was responsible for a payout of over $49 billion for over 23 million people. But if you don’t apply for it, you can’t get it.

Contrary to what you might think, you DON’T need a child to qualify. However, you can qualify with a higher income if you have at least one child. And you don’t need to be a math wizard to figure out the forms. You can get totally FREE help in filling out your income taxes, too. VITA (Volunteer Income Tax Assistance) is available for low-income (up to $49,000), disabled, elderly or those with a poor grasp of English. These volunteers are trained to help you find your EITC if you qualify, and they are available all over the country. To find the nearest one so that you can set up an appointment, call 1-800-906-9887.

And you may not have to settle for just the federal EITC. Twenty two states and the District of Columbia have them as well. See if your state is one, and see if you can get a break—or a refund—on your state income taxes, too. And Happy New Year!

A Dollar Short and a Day Late, I Am

Once again, I manage to miss all the bitchin' tax breaks for making my home more energy efficient. Here's a rundown of some new federal breaks for both homeowners and commercial building owners. Drat me for energy efficiencizing (?) so early!


Also, a new tax break for first time (having not owned a home for the last 3 years) home buyers who purchase their home before December 1, 2009--they can claim a credit on their 2008 OR 2009 returns. They don't have to pay it back if they use it as their continuous residence for 36 months, and can claim 10% of the purchase price (up to $8,000). Income restricts apply, as the credit fades out at higher income levels.