Question

16.LO 7.8 Mike bought a solar electric pump to heat his pool at a cost of $2,500 in 2019. What is Mike's credit? 17.LO 7.8 In 2019, Jeff spends $6,000 on solar panels to heat water for his main home. What is Jeff's credit for his 2019 purchases? 18.LO 7.9 George and Amal file a joint return in 2019 and have AGI of $39,800. They each make a $1,600 contribution to their respective IRAs. Assuming that they are not eligible for any other credits, what is the amount of their Saver's Credit? 11

Answer 1

16. Mike's credit would be $0.

Credits are used because they provide tax relief to certain type of taxpayers. Because of the progressive rate structure of the income tax, a deduction provides greater tax benefit to higher income taxpayers, while a tax credit provides equal tax benefit, regardless of the taxpayer's income level.

Energy credits available to taxpayers are credits for plug-in for electric vechicles and credit for solar, wind and geothermal property.

17. Jeff's credit would be $1,800.

In 2019, the solar tax credit remains at 30% for homeowners solar system installation.

Energy credits available to taxpayers are credits for plug-in for electric vechicles and credit for solar, wind and geothermal property.

18. Since the AGI is $39,800, each of them is therefore eligible to claim a 20% credit for their contributions.

Credit for each = $1,600 * 20% = $320

Together, their Saver's credit are worth $640.