Will the IRS tax forgiven student loans?
Q: Is forgiven student debt taxable? A:
No, at least through 2025. As a general rule, debt cancellation income is taxable. But a 2021 law provides that most student loans forgiven from 2021 through 2025 are tax-free.
President Joe 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. Although many states follow federal law, some don’t.
Q: What tax breaks for energy-efficient home upgrades are included in the Inflation Reduction Act? A:
The break for adding solar panels and the like to your home is extended through 2034. Individuals get a tax credit for installing an alternative energy system that relies on a renewable energy source, such as solar, wind, geothermal or fuel cell technology.
The cost of wind turbines, solar panels, solar electric equipment and solar-power water heaters is eligible for the credit, whether they are installed in a primary residence or vacation home. Starting in 2023, the credit is expanded to cover battery storage technology that is installed in your residence.
The credit equals 30% of the cost of the equipment and installation for 2022 through 2032. It falls to 26% in 2033, 22% 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% of the cost of certain types of insulation, plus external windows, doors and skylights.
The credit also includes 100% 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% 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.