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tax credit question

Preacher & his wife are having new 95%+ furnace with 16-SEER A/C installed. They do pay in taxes to the Feds, but they give away more than enough of their money to charities to get a full refund on their Federal Taxes each year.



I believe they are entitled to the full $1,500.00 (providing they paid in more than $1,499.99 via withholding from their paychecks). My office crew says not since they're already getting back every penny paid in.  



Lunch is riding on the answer! Should I be salivating or reaching for my wallet??? 

Comments

  • Robert O'Brien
    Robert O'Brien Member Posts: 3,325
    What's for lunch?

    The tax credit is non refundable,it can only be used to offset taxes owed.



    http://thefinancebuff.com/2009/02/refundable-tax-credit-and-non-refundable-tax-credit.html
    To learn more about this professional, click here to visit their ad in Find A Contractor.
  • Dave Yates (GrandPAH)
    Dave Yates (GrandPAH) Member Posts: 281
    so, if I read that correctly

    and the Preacher & his wife paid in more than $1,500.00 and gave away more than enough money to offset the money they paid in for taxes - therefore getting a full refund at year end, they still qualify for the full $1,500.00 tax credit and get that back too?



    Surf & turf!
  • John Mills_5
    John Mills_5 Member Posts: 935
    the way I understand it

    Depends upon their tax liability. If their taxes before any withholding is subtracted is a positive number, they can offset that with this credit. If it is more than $1500, they can apply this whole $1500 to it. If their tax liability is less than $1500, they can apply that amount to make it $0. Then they get their withholding applied to that.



    Withholding doesn't matter. If their liability is $1500 and their withholding is $2000 meaning a $500 refund, that $1500 is added to make a $2000 refund.



    Someone who doesn't make a lot and gives a lot away, could have a $0 or negative tax liability and not be able to apply the credit.
  • Dave Yates (GrandPAH)
    Dave Yates (GrandPAH) Member Posts: 281
    biggest loser - me!

    looks like I'm buying lunch!



    Wading through the IRS forms, it is obvious the charitable donations are to be counted against taxes owed first & only after all other deductions are subtracted does the tax credit for energy efficiency upgrades get the last look at any tax liability either pre-paid via payroll deductions or still owed to the Feds.



    Bummer - not so much for the meal owed by me, but for homeowners who are enticed by a potential tax credit only to find it's not there for them. Granted, this is a bit of an unusual case in that they give away enough dollars to offset their Federal Income Taxes to a $0.00 balance, but something to bear in mind when discussing tax credits. In this case it's no-harm, no-foul as the Preacher & his wife wanted the upgrade in efficiency with or without the tax credit.
  • Jack
    Jack Member Posts: 1,045
    I am frequently asked this question

    by my customers and I advise them to not promise any tax credit to the homeowner. Neither I nor the contractor are tax accountants and as such it is best to refrain from promising. I advise that the product "qualifies" for the credit, but that the consumer and their acct are the only ones who can say if they will get it.



    So, whats for lunch Dave?
  • Dave Yates (GrandPAH)
    Dave Yates (GrandPAH) Member Posts: 281
    Crow - for me

    You ever see a smug smirking crew? Not a pretty sight(G). No telling what for lunch, but they're going to have time (I'm headed out for numerous estimates) to plan. Like the commercial asks: what's in your wallet - mine will be drained shortly!



    One silver lining came out of all this tax-credit talk - I think I finally convinced my bride to let me install PV at home. My quest to move towards a net-zero home moves forward another notch. Once that's in, up, & running - I'll broach the electric car subject(G).  
  • Larry Weingarten
    Larry Weingarten Member Posts: 2,147
    Dave, if you're looking to go net zero...

    .. have a look here at the Thousand Home Challenge that Linda Wigington is heading up. It really is challenging in a good way.  I'm almost there with my place.  http://www.affordablecomfort.org/initiatives.php?PageID=16



    Yours,  Larry
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