News & Updates

Homeowners who make improvements like replacing old doors and windows, installing solar panels or upgrading a hot water heater may qualify for home energy tax credits. They should know what these credits can do for them – and be careful of exaggerated claims companies trying to get their business may make.

There are two tax credits to help defray costs for homeowners making energy efficient improvements to their primary or secondary residence. In some cases, renters may also be able to claim specific costs. Landlords can't use these credits for improvements made to any homes they rent out.

Energy Efficient Home Improvement Credit

Taxpayers can claim the Energy Efficient Home Improvement Credit only for improvements, additions or renovations to an existing home. It doesn't apply to newly constructed homes. Qualifying costs may include:

• Exterior doors, windows, skylights and insulation materials.
• Central air conditioners, water heaters, furnaces, boilers and heat pumps.
• Biomass stoves and boilers.
• Home energy audits.

The amount of the credit taxpayers can take is a percentage of the total improvement expenses in the year of installation:

• 2022: 30%, up to a lifetime maximum of $500.
• 2023 through 2032: 30%, up to a maximum of $1,200 annually. Biomass stoves and boilers have a separate annual credit limit of $2,000 annually with no lifetime limit.

Residential Clean Energy Credit

Taxpayers can also claim the Residential Clean Energy Credit for qualifying costs for either an existing home or a newly constructed home. Qualifying costs may include:

• Solar, wind and geothermal power generation equipment.
• Solar water heaters.
• Fuel cells.
• Battery storage.

The amount of the credit taxpayers can take is a percentage of the total improvement expenses in the year of installation:

• 2022 to 2032: 30%, no annual maximum or lifetime limit.
• 2033: 26%, no annual maximum or lifetime limit.
• 2034: 22%, no annual maximum or lifetime limit.

To claim these credits, taxpayers should file Form 5695, Residential Energy Credits, with their tax return.

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Rebuilding after a natural disaster can be overwhelming. Important documents like financial information and tax records are often destroyed in a disaster, and reconstructing these records is important for applying to federal assistance and insurance reimbursement. IRS.gov has the information disaster victims need, including disaster-related filing extensions and information about tax relief.

These IRS.gov webpages have tax-related disaster relief information:

• Reconstructing Records After a Natural Disaster or Casualty Loss: This webpage helps who need to reconstruct their financial records after a disaster. This may be essential for properly documenting a tax-deductible loss, supporting various tax-related transactions or getting federal assistance or insurance reimbursement.

• Tax Relief in Disaster Situations: This page features links to resources that walk people through information that will help them after a disaster. It also links to local news releases and frequently asked questions.

• IRS News From Around the Nation: This page rounds up news about local areas, including disaster relief and tax provisions that affect certain states.

• Frequently Asked Questions for disaster victims: This resource links to pages with answers to questions that victims may have. Each page highlights a specific topic to help people after a disaster.

These IRS publications can also help taxpayers:

• Publication 3067, IRS Disaster Assistance - Federally Declared DisasterPDF provides information to individuals and businesses affected by a federally declared disaster. It also covers the assistance available to disaster victims.

• Publication 584, Casualty, Disaster and Theft Loss Workbook helps individual taxpayers figure their loss on personal-use property in the event of a disaster, casualty or theft.

• Publication 584-B, Business Casualty, Disaster, and Theft Loss Workbook helps businesses figure their loss on business and income-producing property in the event of a disaster, casualty or theft.

• Publication 547, Casualties, Disasters and Thefts explains the tax treatment of casualties, thefts and losses on deposits.

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Sometimes the line between having a hobby and running a business can be confusing, but knowing the difference is important because hobbies and businesses are treated differently when it's time to file a tax return. The biggest difference between the two is that businesses operate to make a profit while hobbies are for pleasure or recreation.

Whether someone is having fun with a hobby or running a business, if they accept more than $600 for goods and services using online marketplaces or payment apps, they could receive a Form 1099-K. Profits from the sale of goods, including personal items, and services is taxable income that must be reported on tax returns.

There are a few other things people should consider when deciding whether their project is a hobby or business. No single thing is the deciding factor. Taxpayers should review all of the factors to make a good decision.

How taxpayers can decide if it's a hobby or business

These questions can help taxpayers decide whether they have a hobby or business:

• Do they carry out the activity in a businesslike manner and keep complete and accurate books and records?
  
• Does the time and effort they put into the activity show they intend to make a profit?
  
• Does the activity make a profit in some years – if so, how much profit does it make?
  
• Can they expect to make a future profit from the appreciation of the assets used in the activity?
  
• Do they depend on income from the activity for their livelihood?
  
• Are any losses due to circumstances beyond their control or are the losses normal for the startup phase of their type of business?
  
• Do they change their methods of operation to improve profitability?
  
• Do the taxpayer and their advisors have the knowledge needed to carry out the activity as a successful business?

Whether taxpayers have a hobby or run a business, good record keeping is always key when it's time to file taxes.

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Taxpayers who missed the recent April filing and payment deadline should know their obligations and the possible consequences if they don't file or have an overdue tax bill.

Taxpayers who owe tax

Tax owed and not paid by April 18, 2023, is subject to penalties and interest. Anyone who didn't file and owes tax should file a return as soon as they can and pay as much as they can to reduce penalties and interest. Electronic filing options, including IRS Free File, are still available on IRS.gov through October 16, 2023, to prepare and file returns electronically.

Filing soon is very important because the late-filing and late-payment penalties and interest on unpaid taxes add up quickly. Some taxpayers filing after the deadline may qualify for penalty relief. For those charged a penalty, they may contact the IRS by calling the number on their notice and explain why they couldn't file and pay on time.

Taxpayers who have a history of filing and paying on time often qualify for administrative penalty relief. A taxpayer usually qualifies if they have filed and paid promptly for the past three years and meet other requirements. For details, taxpayers should visit the first-time penalty abatement page on IRS.gov.

If taxpayers find that they owe taxes, they can review their available payment options. The IRS has options for taxpayers who can't pay taxes they owe. Information on reducing the amount of interest owed is on the interest abatement page of IRS.gov.

Military personnel can still use MilTax

The military community can also file their taxes using MilTax, a free tax resource offered through the Department of Defense. Eligible taxpayers can use MilTax to electronically file a federal tax return and up to three state returns for free.

Some taxpayers have extra time

Some taxpayers may have extra time to file their tax returns and pay any taxes due. This includes some disaster victims, taxpayers living overseas, certain military service members and eligible support personnel in combat zones.

Taxpayers who weren't required to file

Some people may choose not to file a tax return because they didn't earn enough money to be required to file. Generally, they won't receive a penalty if they are owed a refund, but they risk missing out on their refund.

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After filing a return, taxpayers due a refund are usually eager for that money to hit their bank account. They can check the status of their refund easily and conveniently with the IRS Where's My Refund? tool at IRS.gov/refunds and with the IRS2Go app. Refund status is available within 24 hours of the IRS letting the taxpayer know that they got the e-filed return. The tool also gives the taxpayer a personalized refund date after the IRS processes the return and approves the refund.

To use the tool, taxpayers need their:

• Social Security number or Individual Taxpayer Identification number
• Filing status
• Exact amount of the refund claimed on their tax return

The tool shows three statuses:

• Return received
• Refund approved
• Refund sent

When the status changes to "refund approved," the IRS is preparing to send the refund, either as a direct deposit to the taxpayer's bank account or directly to the taxpayer by check in the mail to the address on their tax return.

Taxpayers don't need to check the status more than once a day. The IRS updates the Where's My Refund? overnight in most cases. Calling the IRS won't speed up a tax refund. The information available on Where's My Refund? is the same information available to IRS telephone assistors. Taxpayers should allow time for their bank or credit union to post the refund to their account or for it to arrive in the mail.

Refund timing

The IRS issues most refunds in fewer than 21 days. Some tax returns require more time to review, and this can delay a refund. It takes longer to process a return if the taxpayer:

• Filed their return on paper.
• Is expecting a refund from an amended return. Find processing times of amended returns with Where's My Amended Return?
• Filed an injured spouse claim.
• Attached an ITIN application to their refund claim. Taxpayers can review Topic No. 857, Individual Taxpayer Identification Number, for details.
• Filed a Form 1040-NR to request a refund of tax withheld on a Form 1042-S. In this case, it can take up to 6 months from the original due date of the 1040-NR return or the date they filed the 1040-NR, whichever is later, to get any refund due.

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