President Biden’s plan to forgive up to $10,000 in student loans ($20,000 for Pell Grant recipients) for single filers with incomes below $125,000 ($250,000 for joint filers) is tax-free. Watch out for state taxes. Though many states follow federal law, some don’t.
The credit equals 30 percent of the cost of the equipment and installation for 2022 through 2032. It falls to 26 percent in 2033, 22 percent in 2034 and ends after 2034.
The credit for adding energy-efficient improvements to your main home is back. For 2022, the credit applies to 10 percent of the cost of certain types of insulation, plus external windows, doors and skylights. The credit also includes 100 percent of the cost of electric heat pumps and water heaters, some central air-conditioning systems and similar energy-saving investments. There is a lifetime credit limitation of $500. And the credit is capped for many items: No more than $150 for hot water boilers and furnaces, $200 for a window and $50 for a furnace circulating fan, for example. This credit originally expired at the end of last year, but Congress has now revived it.
And the credit is bigger and better for 2023 through 2032. First, the credit percentage increases to 30 percent of costs. Second, the $500 lifetime limit is replaced with a $1,200 annual limit. This annual limit is lowered to $600 in the aggregate for exterior windows and skylights and $500 for exterior doors, and for other items. The annual limit increases to $2,000 for a biomass stove or hot water boiler, or an electric or natural gas heat pump put in the home. And third, you can take a credit for up to $150 of the cost of a home energy audit.
(Joy Taylor is editor of The Kiplinger Tax Letter. For more on this and similar money topics, visit Kiplinger.com.)
