Weekly Update-Lucky Friday December 13th 2024 🍀Utilizing Banked Solar Power☀️🌦️

The countdown to the end of the year is a “mixed bag” as usual: holiday parties and planned get-togethers with friends and family, hoping for/dreading a snow day ❄️ ❄️ ❄️, picking out gifts 🎁 while contemplating our own wish list📃, looking forward to vacation time while scrambling to complete necessary projects.  We had a busy “mixed bag” week here as usual as we worked on tax minimization plans, calculated corporate estimate #4 (due Monday December 16th), ordered our secret Santa gifts 🎁 through Elfster, chose and ordered our annual holiday card and enjoyed treats from gift baskets like Zabars chocolate babka with our morning coffee (keep those holiday baskets coming)…  We’ve also been attending several year-end tax updates and tax planning webinars.  My main wish for the holidays as usual is for friends and family to be healthy and safe; happy would be great too!

It’s been cold and rainy here most of the week, but I was glad to be able to catch the sunrise a few days…

Monday's Beautiful Sky at Sunrise
Monday’s Beautiful Sky at Sunrise
Tuesday Morning Fog & Drizzle
Tuesday Morning Fog & Drizzle
Cold and Windy Thursday Morning Sunrise
Cold and Windy Thursday Morning Sunrise
28 degrees and Beautiful this Morning
28 degrees and Beautiful this Morning

And it’s even colder in Michigan where they have been getting snow for a few weeks already…

Even Colder in MI
Even Colder in MI

I am hoping you stay warm and dry as you enjoy your weekend of shopping, relaxing, and enjoying the holiday spirit…

WEEKLY TAKE AWAY

Mittens!!!!! As the weather this week turned even colder, I added more layers.  This morning at 28 degrees and a bit windy I exchanged my fleece gloves for fleece lined mittens.  As I walked over the berm and started my walk all I could think of was mittens.  Several weeks ago, I switched from a sun hat to my wool ski hat, added several fleece and windproof layer plus my ski gator.

Mittens!!!!
Mittens!!!!

TAX ISSUES/TAX PLANNING

Tax Planning Starts at Home With Solar Pannels and Other Home Improvements

I was happy to meet several new professional contacts last night at the annual Chinese American Society of Certified Public Accountants (CAS CPA) holiday party, including Bruce Wang, solar consultant from @amergysolar.  I pulled up my solar app to show him how even in the winter my panels were hard at work.  My system “banks” extra solar production that can be utilized on overcast days and overnight.  He congratulated me on my choice and we discussed environmental impacts and of course the tax credits which I was able to utilize when I filed my 2023 federal and state tax returns.  I was sorry to hear that many potential customers he speaks with do not understand the tax impact of this type of investment.  Of course we exchanged cards; Bruce this re-post from May 24th 2024 is for you…

“Considering adding some energy efficiencies to your home?  Take some time to read through the rules and consider an installation on your home too…

If you make energy improvements to your home, tax credits are available for a portion of your qualifying expenses. You can claim either the Energy Efficient Home Improvement Credit or the Residential Clean Energy Property Credit for the year when you make qualifying improvements.  Improvements to your primary residence offer opportunities to claim a credit. If you own a second home and use it as a residence, you may also be able to claim these credits. You cannot take credits for property you rent to others.  Feel free to contact us to help you determine if the benefits offered by installing solar panels, new windows and exterior doors, insulating your attic, etc will be good for your tax returns as well as the environment.

Who Can Claim the Credits:

  • You can claim either the Energy Efficient Home Improvement Credit or the Residential Energy Clean Property Credit for the year when you make qualifying improvements.
  • Homeowners who improve their primary residence will find the most opportunities to claim a credit for qualifying expenses. Renters may also be able to claim credits, as well as owners of second homes used as residences.
  • The credits are never available for improvements made to homes that you don’t use as a residence.

Energy Efficient Home Improvement Credit

These expenses may qualify if they meet requirements detailed on energy.gov:

  • Exterior doors, windows, skylights and insulation materials
  • Central air conditioners, water heaters, furnaces, boilers and heat pumps
  • Biomass stoves and boilers
  • Home energy audits

The amount of the credit you can take is a percentage of the total improvement expenses in the year of installation:

  • 2022: 30%, up to a lifetime maximum of $500
  • 2023 through 2032: 30%, up to a maximum of $1,200 (biomass stoves and boilers have a separate annual credit limit of $2,000), no lifetime limit

Get details on the Energy Efficient Home Improvement Credit.

Residential Clean Energy Credit

These expenses may qualify if they meet requirements detailed on energy.gov:

  • Solar, wind and geothermal power generation
  • Solar water heaters
  • Fuel cells
  • Battery storage (beginning in 2023)

The amount of the credit you can take is a percentage of the total improvement expenses in the year of installation:

  • 2022 to 2032: 30%, no annual maximum or lifetime limit
  • 2033: 26%, no annual maximum or lifetime limit
  • 2034: 22%, no annual maximum or lifetime limit

Get details on the Residential Clean Energy Credit.

You can visit IRS.gov/home-energy-tax-credits for full details including a comparison chart. This chart can help you decide if the credits apply to expenses you’ve already paid or will apply to improvements you’re planning.

Solar Panels at Work
Solar Panels at Work

ECONOMY

US Economy Grew Slightly in Recent Weeks

As reported in this recent article from Reuters.com:  “U.S. economic activity has expanded slightly in most regions since early October, with employment growth “subdued” and inflation rising at a modest pace and businesses expressing optimism about the future, the Federal Reserve said on Wednesday in a summary of surveys and interviews from across the country known collectively as the “Beige Book.”

  • Fed’s Beige Book shows slight economic expansion, subdued employment growth
  • Inflation risks linked to potential new tariffs under Trump administration
  • Markets expect Fed rate cut despite sticky inflation”

US Labor Market Rebounds in November as Economy Adds 227,000 New Jobs

As reported in this recent article from TheEpochTimes.com:  “The U.S. labor market rebounded in November following the previous month’s abysmal jobs report, which was fueled by labor strife and natural disasters. According to the Bureau of Labor Statistics (BLS), the economy added 227,000 new jobs last month from the upwardly revised 36,000 positions in October.

Growing National Debt Sets Off Alarm Bells for U.S. Business Leaders

As reported in this recent article in PGPF.org:  “Federal debt will soon eclipse its all-time high of 106 percent of Gross Domestic Product (GDP), which was reached just after World War II. What is worse, the nation’s debt is projected to continue rising in the future due to a structural mismatch between federal spending and revenues. Debt rising unsustainably threatens the country’s economic future, and a number of business leaders have signaled their concern.”

Business Leaders’ Optimism About U.S. Economy Soars After Election

This recent article from InsidePublicAccountingInsider.com sites survey results:  “Business leaders registered a huge shift in positive sentiment about prospects for the U.S. economy and their own organizations in the wake of the recent U.S. presidential election, according to the fourth-quarter AICPA & CIMA Economic Outlook Survey. The quarterly survey polls CEOs, CFO, controllers and other CPAs in U.S. companies who hold executive and senior management accounting roles.”

A Look Ahead to 2025 Economic Predictions

This recent article in GreenvilleBusinessMag.com sites:  “Election Day is in the rearview mirror. Wells Fargo chief economist Jay Bryson and senior economist Michael Pugliese note that Donald Trump has been elected president of the United States, Republicans picked up a majority of seats in the Senate, and the GOP now controls the House of Representatives. As the dust continues to settle, the economists in a special Nov. 6 commentary offered preliminary thoughts on the election results and their implications for the U.S. economy.

  • Tax & Spend Policy: An extension of the expiring provisions of the 2017 Tax Cuts and Jobs Act (TCJA) is already baked into our existing economic forecast. As a result, a full extension enacted sometime next year, should that occur, would not have an impact on our forecasts for economic growth, inflation, the federal budget deficit, etc.
  • Some additional tax cuts seem probable in our view, although the timing, size, and specifics are highly uncertain. New tax cuts of a similar size to the original TCJA probably would lead us to upwardly revise our forecasts for real GDP growth and inflation by a couple of tenths of a percentage point in 2026 and 2027, all else equal.
  • Trade Policy: President-elect Trump has proposed a 10 percent across-the-board tariff on America’s trading partners with a 60 percent tariff levied on China. If implemented shortly after Inauguration Day on Jan. 20, these tariffs would impart a modest stagflationary shock to the U.S. economy in 2025. Our model simulations show that the core CPI inflation rate next year would shoot up from its baseline value of 2.7 percent to 4.0 percent. Under this scenario, U.S. real GDP would rise by a sluggish 0.6 percent in 2025.
  • Of course, President-elect Trump may decide not to impose tariffs that are so high, and he may not do it so quickly upon taking office. Furthermore, we view these estimates as closer to an upper-bound than a midpoint of the range of possible outcomes. That said, we are inclined to push up our core CPI inflation forecast for 2025, currently 2.7 percent, given the balance of risks.
  • Tariffs would offset the boost to economic growth from tax cuts but would further add to the inflationary impulse from tax cuts. Thus, although we may reduce our economic growth forecasts for the next couple of years due to higher tariffs, tax cuts could serve as a mitigating factor. Finally, tariffs increase federal revenues, suggesting they might help limit deficit widening from extending and expanding the TCJA.
  • Federal Reserve: Our current forecast looks for the FOMC to cut its target range for the federal funds rate to 3.00-3.25 percent by the end of next year. However, the FOMC may not want to ease policy by that much if new tax cuts and tariffs cause inflation to shoot higher over the next couple of years. Thus, we think the risks to our fed funds rate forecast are skewed to the upside (i.e., less easing next year than we currently project).
  • The FOMC’s reaction function likely would be more hawkish in response to higher inflation from tax cuts than from tariffs. Tighter monetary policy is an effective method for slowing demand growth, but it cannot do much to combat inflationary pressure from a supply shock such as tariffs.”

GENERAL RESOURCES

We sincerely hope that you and your family are well and remain well. If you have any questions or concerns, don’t hesitate to reach out to us. We are here for you.

If you need help with your accounting, want to create a tax minimization plan, want to discuss your business growth plan or your finances, are concerned about retirement goals or need to be held accountable for your 90 day action plan, contact us for a complimentary discovery session or an appointment to just get started

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