The Tax Advantages of Going Green in 2010

Last week the RDTC Tax Help Blog posted a new entry explaining the tax advantages of going “green” in 2010. As you can see from the text below, there are plenty of credits and tax breaks for both individuals and businesses that make energy efficient purchases. You can find a snippet of the original entry below, or checkout the full text at RDTC.com.

Driving Green

Unfortunately many taxpayers are under the impression that all of the tax incentives for buying a hybrid vehicle have expired. However, this is not true. There are plenty of popular vehicles that qualify for the tax credit. A few 2010 Ford Hybrids qualify for a couple of credits, including the Fusion, which can qualify for a credit of up to $3,400. Additionally, electric vehicles such as the Chevy Volt offer the best credits. If you decide to buy an electric vehicle in 2010 then you can claim a credit of up to $7,500.

Conscious Commuting

If you live close enough to your work to be able to ride your bicycle back and forth every day, then you might be eligible for tax-free reimbursement from your employer (if they participate in the program). New legislation allows employers to give employees up to $20 a month for riding a bike to work. Additionally, employers can reimburse up to $230 per month of an employee’s public transportation expenses. Be sure to talk to your employer or human resource department to see if they offer conscious commuting reimbursements.

Solar Savings

Homeowners and businesses have been able to take tax credits for installing solar panels for a while now, but many taxpayers are resistant due to the high expense. However, the prices of solar upgrades have gone down drastically over the past few years. Additionally, even less expensive solar products – such as solar powered water heathers – will qualify for a tax credit of up to 30% of the purchase price. This credit can even be claimed against the AMT.

Continue reading at RDTC.com…

Municipal Bonds Are Worth A Look If You Can Handle The Risk

From USA Today.com:

Q: How do I go about adding municipal bonds to my portfolio?

A: Lending money to cities, states and local government agencies used to be a good move for investors in high tax brackets. That's made municipal bonds attractive investments for years.

By buying municipal bonds, investors looking for income not only received regular payments, they got excellent tax savings. The income paid by municipal bonds is typically exempt from federal taxes and often exempt from state taxes, if the investor lives in the state issuing the debt.

The whole muni bond market suffered a body slam during the credit crunch. Now, investors have become increasingly concerned about the ability of states and local governments to pay their debts.

This wasn't much of a concern before, since most local governments offered investors insurance to cover the possibility of default. But many bond insurers have been crippled by mortgages losses, so the value of the insurance has diminished.

The result? Yields on municipal bonds are attractive, but only if you can handle the higher risk. Gone are the days when you could blindly buy a municipal bond and assume even if things went badly you could get your money back.

To show you just how turned around the muni bond market has become, consider the Vanguard Intermediate-Term Tax-Exempt Fund Investor Shares (VWITX). The fund, which owns a basket of muni bonds maturing in seven years on average, is yielding about 3.4%, exempt from federal taxes.

That's an astounding yield if you consider the after-tax yield for a person in the 25% tax bracket is closer to 4.5%. It's even more impressive if you consider that the yield on 10-year Treasuries is just 3.0%.

Does this mean you should consider muni bonds? Clearly, if you understand the risks it's hard to argue with the yields. Just remember, though, that you can't just blindly buy single muni bonds anymore. If you're buying individual bonds you must take the time to understand the municipalities' demographics, tax trends and fiscal position.

The alternative is to buy a mutual fund that does the work for you. One place to start looking is USATODAY.com's Mutual Fund Screener. You'll find the funds under Fixed Income - Tax Exempt by state and by maturity, long, short or intermediate.

Tax Advantages to Having Kids?

Apparently, the IRS wants you to have kids, and they have several ways to offset the cost of raising them.

The Child Tax Credit applies to qualifying children age 17 and under. This credit can be applied so long as your total tax due is more than the credit, and you meet certain income requirements (Modified Adjusted Gross Income under $110,000 for married filing jointly, $75,000 for single, and $55,000 for married filing separately). This credit can be up to $1,000 per qualifying child.

Taxpayers who do not meet those two criteria can still claim part of the credit and may be able to claim the Additional Child Tax Credit. See IRS Publication 972 to determine your total Child Tax Credit.

Additionally, if you have children under the age of 13 and you pay for childcare so you and your spouse can work, you may qualify for the Child and Dependent Care Tax Credit. This allows you to credit up to 35% of qualifying expenses.

Even better, these are not exclusive credits. If you have children who meet all qualifications, you can claim each of these credits, though certain other credits may reduce the amount you claim (such as the First Time Home Buyer Credit). As with all tax-related information, you should take the time to do the math for yourself, or ask a tax specialist.

Not that these tax credits should spur you to have a child. But, since the projected cost of raising a child to the age of 18 (not including college tuition!) is just shy of $200,000, parents need all the help they can get.

U.S. Insurers Urge Swift Adoption of Legislation to Reduce Unfair Tax Advantages

From Market Watch:

The Coalition For A Domestic Insurance Industry, a group of 14 major U.S.-based insurance groups, applauds the introduction of a bill by Rep. Richard Neal (D – Mass.) to level the playing field and close the current loophole that provides foreign-based insurers a competitive advantage over domestic insurers in underwriting U.S. risks. This unfair tax advantage arises because foreign insurance groups operating in the U.S. are presently allowed to strip the bulk of their profits out of the U.S. merely by reinsuring risks to affiliates located in tax havens, and thus avoid paying billions of dollars in U.S. taxes. The tax treatment of these transactions undermines the ability of domestic companies to compete and ultimately threatens the future of our domestic insurance industry.

"The tax advantage, which originated in practice around 20 years ago, has already caused significant migration of insurance capital abroad," explained William R. Berkley, chairman and chief executive officer of W. R. Berkley Corporation and spokesman for the Coalition For A Domestic Insurance Industry.

Growth in related-party reinsurance written to foreign affiliates has been dramatic. In 2007, $58.4 billion of U.S. premiums went to foreign insurance companies, with nearly 60 percent ($33.8 billion) of those premiums going to related foreign reinsurance companies. Since 1996, U.S. premiums going to affiliated foreign reinsurers have increased at a compound annual growth rate of 21.4 percent.

"With the stroke of a pen, foreign-based groups can shift their profits overseas to affiliates in tax-advantaged locations. The principal incentive for this increased related-party reinsurance activity has been the avoidance of U.S. income tax," Mr. Berkley concluded.