Alright, this is Episode 3 of 8,
covering the Tax Strategy Framework that I use personally in my one-on-one consultations
with people, as well as what we use in the Beamton Company Strategy Department.
And number 3. Number 3 is about tax credits.
number 1 was deductions, of course.
Number 2 was accelerating expenses and deferring income.
And number 3 of 8 is tax credits.
But to differentiate between the two of course, what deductions are and tax credits,
so we talked about deductions actually reduce your taxable income.
They reduce the big number that we're calculating the tax on.
Tax credits come after. Tax credits come after the tax is
calculated, then we actually reduce that tax directly by the amount of the
credit. So, tax, if I could,
if I could choose, or if you could choose a thousand dollar deduction,
or when thousand dollars tax credit, always go with the credit.
The credit will save you exact, will give you a thousand dollars back in
your pocket. A deduction will just reduce your taxable income,
and then you multiply it by your tax rate. It, that might be save
you a thousand to three thousand, or a hundred to three hundred dollars,
but the credit will save you the amount of the calculated credit.
So I'm gonna go through, we, we do talk about,
like, whether it's individuals or individuals.
Or employees, or business owners, or investors,
like who, we want to talk about who could be getting the different types
of credits, but I'll, I'll just go through some of these very specific examples.
Some of the, like, some very common examples of credits,
and maybe some of the not-so-common ones, some of the,
yeah, some credits you might want to be looking into.
So this first one I'll talk about is, is a very common one.
It's the tax credits related to having kids. So when you have a kid,
or you claim a child as a dependent,
there's a child tax credit that you can claim in the tax year 2024,
2025, and in the next few years.
when the kids are 16 and under,
you can get a $2,000 tax credit for the child,
and when they're older than that, 17 and up, there's a $500 credit that
you can get. And there's really nothing you need to do for that other
than they need to live in the house with you for at least six
months, and they need to be your child,
and you need to claim them on your tax return. There's really no additional
steps. Just put them on the tax return. some of the other,
some of the other common ones. Are,
like, Solar Tax Credits, so Solar Tax Credits,
there are credits for those where you can get 30% back,
30% of the cost of what it costs to install it on your house,
you can get 30% back as a tax credit, and this, something to,
like, something to watch out for is, I know a lot of these solar
companies will say, hey, give us 30,
$30,000,
You'll get $10,000 back on your, like,
as a credit. sometimes they assume that you will always get $10,000 back in
cash on your tax return. That's not always the case.
It is a credit, and their calculation is a $10,000,
isn't wrong. But where they get it wrong sometimes,
that credit isn't refundable. Like,
the credit doesn't come out of thin air. The credit offsets other tax.
So if you had other tax that you're offsetting,
and you had taxes withheld, that's not you can get it back.
But say you had zero income in a year,
and you put solar on your house, you didn't pay in any tax,
and so you're not going to be getting any tax money. You're tax money
So just watch for that. Make sure to do the calculation for that.
That's the solar tax credit. Which,
I think solar tax credits can be great.
Just make sure you're running the numbers. Make sure sometimes,
the cost might,
the cost and what you're paying on a loan, especially with the high interest
rates lately, might not pay for the,
like the savings on your, the savings on your utility bill.
And, Just but make sure you're running the numbers completely. Don't just,
you, you can sometimes trust the sales people, but make sure you're running your
own numbers as well. Make sure you understand the numbers, you're not just blindly
trusting them. another credit we really like. Of course,
is the tuition credits. We still have,
the, credits related to tuition, especially the first four years of college.
There's credits, and then after that, there's credits as well.
you need to form 1098T. That's the,
That's the amount that the college just reports to each year.
It's, they're, give it to you on a tax form, the 1098T.
They also report it to the IRS. So the IRS can confirm that you
actually did pay the pay and,
and qualify for those credits. And remember, If you claim a kid,
you can claim your child's tax credits as well.
Or your, your child's tuition. And I know some parents are like,
oh, our kid pays for all their tuition.
But if you claim the kid on your tax return,
Then you can claim the tuition even if they paid for it.
So don't, don't forget that part. next thing is, is,
is there are credits related to energy efficient property,
apply, appliances. So there are some,
I think, honestly, I think the appliance one might have ran out.
I should check into that, but there are,
energy efficient windows, insulation,
exterior door, connectors. those are some of the most common ones.
the appliance one has kind of gone back and forth. I actually don't think
the appliance one is applicable right now,
but insulation, doors, exterior windows.
And have any I be a bit Thank you. These on it,
the energy efficient property, they're not massive credits.
the solar is actually much bigger. It's like 30% no cap.
Like no cap on it. energy efficient property. It's in total,
usually less than a 10% thousand bucks. So I wouldn't bank on a huge
credit coming back to you with energy efficient property.
so now shifting a little to some of the business owners.
So some, like business owners here, here's some credits that you could use.
there are imp- employment related credits.
So there are credits related to, or like for your employees.
So if you pay for retirement plan, there's credits that you can get back
to pay for sometimes all the cost of retirement plan.
so make sure you're claiming those or seeing that those are claimed each year.
there are, for certain types of people that you,
that you hire, like the work opportunity tax credit.
Like if you're hiring veterans, if you're f- if you're hiring ex felons,
if you're hiring people that qualify for like food stamps or snap.
Like, there's certain types of individuals.
If you hire them, you can get part of their wages back as a
credit, which can be. Good.
another thing. So this is kind of more for investors.
Next couple are like low income housing tax credits.
Definitely consider that. If you have a project or property
that could be considered low income housing,
there are potential some tax credits there.
There are historic preservation credits,
which historic preservation Could be for an,
on the investor side, but also on the personal side.
Like we've seen people, if you, if you live in a house,
it's old and. Well, typically very old.
it could have been remodeled or improved over the years of.
Of course, but if it's in like some of those historic zones,
something you'll want to consider. There's historic areas considered like considered historic by the
state and the historic areas that are considered historic by the federal government.
There's different credits for both. But definitely consider those.
another one. So the electric vehicle tax credits.
So September 30th, we're a couple months past that now,
September 30th of 2025 is when the electric vehicle tax.
were they expired? I don't know. We don't know if they're going to come
back yet, but they did not renew them in the one big beautiful bill
act. I honestly kind of expected they would,
but they weren't renewed. and they were kind of shut down at the end
of September. So,
if you bought a vehicle before then or in prior years,
make sure you claim those credits. There were lease credits,
used vehicle credits. and new vehicle credits.
So, make sure you look at all those. And last but not least,
one of my favorite, one of the biggest credits that is so often overlooked
for business owners is the R&D TAC- credit.
So, the R&D TAC- credit, this one, this one,
like the misconception I'd say with this one is that a lot of people
think of R&D, you need to, which stands for me.
Research and development. You think of,
like, scientists, lab codes,
mixing chemicals, like, oh, we're, there's not a lot of businesses like that.
So, a lot of business owners don't think they would qualify.
Bye. It's not just for mixing chemicals or lab codes or scientists.
Like, there's research, like, what people are doing in AI.
Like, with AI right now, when computers and software and technology,
if you were creating, a new process or a new system or a new
product or new service, you're creating something,
the cost that go into creating that new thing.
If it's just like your typical operating costs,
like, say you're a, say you're a home builder.
And you're just building someone's house. Like,
the cost for that and your regular wages for that are not going to
count. But as an example, say you're a home builder,
you're like, we are building a new type of home.
Or we're working with architects and engineers.
We're building a new low cost of, alternative to typical home building.
Like, that new thing you're creating.
And it's, you're testing it, you're building it,
and you're trying to implement something brand new. Those costs,
those are the ones that can qualify for R&D tax credits.
And just, Real rough numbers, the numbers,
you've got to go through a full R&D tax credit summary,
or calculation and study. but just really roughly expecting,
I would, I would, I'd. Let's see. So you want commonly estimated it,
like, the cost, the amount of the cost that you're paying for
these, the R&D, I would roughly expect that you're getting back about 10%.
. So if you spend $100,000 on testing all this new stuff,
just rough, rough number throughout there to just see if you think it'd be
worth it. You'd be getting back about $10,000.
So, even with $100,000. Which is quite a bit.
But getting $10,000 back is pretty amazing.
So, it can definitely pay for what the government wants,
wants more R&D, more improvement, more investing into creating new things.
So, that is it. That is the, That's tax credits. Hopefully that makes sense
on the difference between a credit and a deduction.
And hopefully I brought up some ideas,
whether you're an individual, an investor, or a business owner,
for some potential tax credits you could be looking to implement.
simple. This year or future years. Okay,
we will come back to you here soon with the other episodes with remaining
four to eight on the tax strategy framework.
Talk to you later.
