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The Tax Benefits of Going Green
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Article Highlights: Refundable vs. Nonrefundable Credits Home Solar Credit Solar-Power Tax Credit Phaseout Is Solar Worth the Expense? Homeowner vs. Home Resident Solar Additions Leased Solar Systems Plug-in Electric Vehicles Multiple Vehicle Purchases Personal Tax Credits General Business Credits Congress uses tax deductions and tax credits to influence taxpayers’ actions. For instance, it seeks to stimulate taxpayers to reduce their energy consumption and moving away from the use of fossil fuels. In this article, we explore the benefits and drawbacks of two major incentives: the home-solar credit and the electric-vehicle credit. Tax credits come in two types: refundable and nonrefundable. Refundable tax credits apply even for taxpayers who owe no tax. On the other hand, nonrefundable tax credit can only offset actual tax liability; any excess is lost (or, in some cases, carried over for a limited number of years until used up). Solar Power – The credit for installing solar-energy systems for generating electricity or heating water at a first or second home is currently a whopping 30% of the cost of the solar installation. However, the credit amount is scheduled to begin phasing out after 2019, dropping to 26% in 2020 and 22% in 2021; after that point, the credit will expire. The unused credit does have a limited carryover and can be added to the allowable credit in the subsequent year. Although solar manufacturers are quick to mention the 30% credit, they generally avoid mentioning that the credit is nonrefundable and has a limited carryover, which causes potential buyers to believe that the federal government always pays 30% of the installation cost. This can lead to very unpleasant surprises and even financial hardship when the purchaser of a home-solar system does not get the full credit. Thus, before proceeding with a solar-power purchase, make sure that you contact this office to find out how the credit will benefit you. You should also take a hard look at your average monthly electric bill so that you can calculate how long it will take for the solar-power system to pay for itself based on the system’s cost and on the loan interest (if the purchase is financed). You should also consider whether the system will increase or decrease the value of the home. You may discover that a solar-power system is not right for you. You do not have to be the owner of the home where the system is installed to take this credit, but you must be the owner of the solar property. The tax code does not specify that the taxpayer has to also own the home—only that the taxpayer must own the solar-power system and that the system must be installed at the taxpayer’s residence. For example, an adult son who lives with a parent in the parent’s home and who pays for a solar installation on that home would be able to claim the credit—but the parent would not be able to.
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Tax and Financial Insights
by NR CPAs & Business Advisors
2026 IRS Mileage Rates: Key Updates and Insights
The IRS has rolled out the inflation-adjusted mileage rates for 2026, offering taxpayers an efficient way to claim deductions for vehicle-related expenses incurred for business, charity, medical, or moving purposes. These adjustments reflect the continued economic shifts impacting car operation costs.
Effective January 1, 2026, the new standard mileage rates are established as follows:
- Business Travel: Increased to 72.5 cents per mile, inclusive of a 35-cent-per-mile depreciation allocation. This marks a rise from the 70 cents per mile rate set for 2025
- Medical/Moving Purposes: Reduced slightly to 20.5 cents per mile, down from 21 cents in the previous year, reflecting the variable cost considerations.
- Charitable Contributions: Consistent at 14 cents per mile, a fixed rate unchanged for over a quarter-century.
As is typical, the business mileage rate considers the integral fixed and variable costs of automobile operation. Meanwhile, the medical and moving rates remain contingent on variable expenses as determined by the IRS study.
It is critical to note that the One Big Beautiful Bill Act (OBBBA) held firm on disallowing moving expense deductions except for specific cases within the Armed Forces and intelligence community, marking a substantial shift since 2017.
When engaging in charitable work, taxpayers might opt for a direct expense deduction over the per-mile method, covering gas and oil costs. However, comprehensive upkeep and insurance costs are non-deductible expenses.
Business Vehicle Use Considerations: Taxpayers can alternatively compute vehicle expenses using actual costs, which might benefit from shifting depreciation rules, particularly through bonuses and first-year advantages. Keep in mind, however, reverting from actual cost calculations to standard rates in subsequent years is restricted, particularly per vehicle protocol and when exceeding four vehicles in concurrent use.
Additionally, parking, tolls, and property taxes attributable to business can be deducted independently of the general rate, an often-overlooked advantage by many business owners.
Tax Strategies for Employers and Employees: Reimbursements based on the standard mileage framework, providing the right documentation is in place, remain tax-free for employees. Meanwhile, the elimination and continued prohibition of unreimbursed employee deductions continue, with particular exceptions offered to qualified personnel across specific occupations.
Opportunities for Self-employed Individuals: Entrepreneurs remain eligible for deductions on business-related vehicle use via Schedule C, with potential to account for business-use interest on auto loans.
Heavy SUVs and Deduction Advantages: Heavier vehicles exceeding 6,000 pounds but under 14,000 pounds open opportunities for substantial tax deductions through Section 179 and bonus depreciation avenues. The lifecycle of such a vehicle bears implications on recapturing initially claimed deductions, urging cautious tax planning.
For professional guidance on optimizing your vehicle-related tax deductions and understanding their implications on tax strategies, contact our office in Coral Gables, Florida, where expert advice and strategic insights are just a call away.
Educator's Deduction Reform: Key Changes Under OBBBA
The One Big Beautiful Bill Act (OBBBA) introduces significant enhancements for educators' tax deductions starting in 2026, offering both strategic opportunities and planning considerations for educators who qualify. With the reinstated itemized deduction for qualified unreimbursed expenses, educators have a broader spectrum of financial relief. This is complemented by the retention of the $350 above-the-line deduction, allowing educators to maximize their tax benefits by selectively allocating expenses between these avenues.
Understanding the nuances of these changes is crucial for educators and financial advisors alike. The dual-option deduction strategy can potentially enhance tax efficiency, thereby aligning with broader financial planning goals.
At NR CPAs & Business Advisors, based in Coral Gables, Florida, our expertise in tax preparation and planning provides invaluable support to educators navigating these changes. Our comprehensive approach, combined with personalized advice from our experienced team, ensures compliance and optimization in line with the latest tax legislations.
Given these updates, it is imperative to engage with seasoned professionals to fully leverage your deduction strategies. Contact us today to streamline your tax planning under OBBBA's new guidelines and maximize your deductions for upcoming tax years.
