IRS Explains How Going Green Could Qualify For Expanded Tax Credits

FROM IRS NEWS IR-2023-97, May 4, 2023

WASHINGTON — The Internal Revenue Service reminds taxpayers that making certain energy efficient updates to their homes could qualify them for home energy tax credits. The credit amounts and types of qualifying expenses were expanded by the Inflation Reduction Act of 2022. Taxpayers who make energy improvements to a residence may be eligible for expanded home energy tax credits.

What taxpayers need to know

Taxpayers can claim the Energy Efficient Home Improvement Credit and the Residential Clean Energy Credit for the year the qualifying expenditures are made. 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. Landlords cannot claim this credit. IRS encourages taxpayers to review all requirements and qualifications at IRS.gov/homeenergy for energy efficient equipment prior to purchasing. Additional information is also available on energy.gov, which compares the credit amounts for tax year 2022 and tax year 2023.

Energy Efficient Home Improvement Credit

Taxpayers that make qualified energy-efficient improvements to their home after Jan. 1, 2023, may qualify for a tax credit up to $3,200 for the tax year the improvements are made. As part of the Inflation Reduction Act, beginning Jan. 1, 2023, the credit equals 30% of certain qualified expenses:

  • Qualified energy efficiency improvements installed during the year which can include things like:
    • Exterior doors, windows and skylights.
    • Insulation and air sealing materials or systems.
  • Residential energy property expenses such as: Central air conditioners, Natural gas, propane or oil water heaters, and Natural gas, propane or oil furnaces and hot water boilers.
  • Heat pumps, water heaters, biomass stoves and boilers.
  • Home energy audits of a main home.

The maximum credit that can be claimed each year is:

  • $1,200 for energy property costs and certain energy efficient home improvements, with limits on doors ($250 per door and $500 total), windows ($600) and home energy audits ($150).
  • $2,000 per year for qualified heat pumps, biomass stoves or biomass boilers.

The credit is available only for qualifying expenditures to an existing home or for an addition or renovation of an existing home, and not for a newly constructed home. The credit is nonrefundable which means taxpayers cannot get back more from the credit than what is owed in taxes and any excess credit cannot be carried to future tax years.

Responsibility And Accountability Is the Key to Success

By our friends at Dental Office Compliance of New England LLC:

Is your office experiencing any of the following?

  • Low morale
  • Ineffective execution/the same issues recur
  • Low levels of trust with/among employees
  • High turnover

As an office owner, it’s easy to blame such problems on someone else or external factors, but more often than not, they arise because of a lack of responsibility and accountability.

Everything starts at the top.  If the top person who works at the business premises everyday doesn’t set the tone, assign responsibilities, and enforce expectations, nothing will be done to the standard it needs to.  The good news is that it’s not too late to establish a strong foundation for success moving forward.  Below are the steps a leader can take to set things right:

  1. Clearly define the job descriptions and responsibilities of each employee.  Each employee should have specific functions that s/he needs to accomplish.  Make sure that each required function in the office has a person assigned to it.
  2. Make sure each employee understands his/her role as well as how important it is to the entire operation of the business.  You or another manager should explain to each employee the functions assigned to him/her and allow the employee – without judgment or repercussions – to ask questions and, if necessary, get additional training to clarify any knowledge gaps.  Moreover, explain to the employee how his/her role fits into the overall operation of the business and is valued by management.  Employees engage more when they understand why they are doing something and that it is important.
  3. Make sure each employee understands that s/he is responsible for the completion of his/her tasks each day and that there will be consequences for non-performance.   This is where a lot of leaders fall short.  They don’t want to take charge because they are afraid of being perceived negatively by employees.  However, you’re not there to be everyone’s friend.  You’re running a business that exists to provide high-quality and safe dental care to patients.  If something isn’t being done right, you need to intervene and act like a leader.

In terms of how to establish accountability and/or consequences, consider the following approach:

  • The first time an employee doesn’t perform a given function correctly, meet with the employee to better understand what got in the way.  If there is a knowledge gap or misunderstanding, address it.  Reiterate the office’s procedures and make sure the employee understands them so that the issue will not recur. This conversation should be constructive, not accusatory.
  • The second time an employee doesn’t perform a given function correctly, you can and should take a more serious tone.  Consider providing a verbal warning to the employee that non- or inadequate performance of the same function multiple times is not acceptable and that further miscues will result in a written warning and/or financial penalties (e.g., ineligibility for advancement, raises and/or bonuses).
  • The third time an employee doesn’t perform a given function correctly, issue a written warning and tell the employee that you are implementing the financial penalties you discussed previously.  Depending on the nature of the task and the severity of the consequences of non-performance, you may need to take more drastic action such as terminating the employee. (During this process, don’t be hesitant to reach out to your HR company or another consultant for guidance.  They’ve seen these issues before and can help you handle them properly given your particular facts and circumstances) 
  • Treat all employees equally and don’t play favorites.  Nothing kills morale faster than employees seeing the boss’s favorite get special or different treatment for making similar infractions as everyone else.  As the leader, you have to have a common and consistent standard and treat employees equitably in terms of responsibilities and accountability.  
  • Reward and celebrate good performance.  Let employees know when they are doing a good job.  Employees need to hear that from you, the leader.  It shows that you are engaged and paying attention.  If an employee shows consistently high performance, consider giving that person additional responsibilities (as well as additional compensation or recognition).

If you start to take these leadership actions, you’ll likely see a diminishment and even the elimination of the issues listed at the top of this article.  As business owners and/or leaders on the premises, you’ve put tons of time and hard work into building the business and establishing your reputation.  There’s too much to lose by not doing things right.  Now your job is to make your employees feel the same way.

As the great basketball coach Pat Summitt once said, “[r]esponsibility equals accountability, accountability equals ownership, and a sense of ownership is the most powerful thing a team or organization can have.”

For more info and to learn how Dental Office Compliance of NE LLC can help you with our practice, please visit them at: https://doc4ne.com/ or email them directly at: Russell@doc4ne.com.