Richard A. Lindsey, CPA

Lindsey & Waldo, LLC – Certified Public Accountants

  • Oct 21

    Homeowners that retrofit their homes to help withstand hurricane and windstorm damages will be able to deduct up to $3000 from their state taxable income. At the 5 percent rate paid by most Alabamians, the maximum savings would be around $150. While $150 is not enough to re-roof a house, it is a step in the right direction to provide incentive for the homeowners that are taking the proper steps to protect their homes. The Legislators of Alabama understand that the savings available aren’t going to cover much of the improvements that would be needed on most homes, and are hoping to soon be able to add other incentives such as grants or a federal income tax deduction to help make improvements be more attainable. There is, however, an Alabama law already in place that has set a mandatory insurance discount of at least 15% for certain home improvements, such as roofs, doors and windows. 

    The Insurance Department trust funds may soon allow coastal Alabamians to retrofit their homes for hurricanes without having to personally pay for the improvements. The Strengthen Alabama Homes Fund aims to pay all the costs of storm-proofing typical homes.  The fund currently has no revenue stream, but the bill’s sponsor, Sen. Ben Brooks, R-Mobile anticipates that fine money from the Gulf oil spill and federal grants will eventually provide the funds. The Department of Insurance will have final say on who receives the grants and how much they receive. According to Brooks, the fund would likely cover the $7,000 to $12,000 cost of a typical home retrofitting. 

    Law makers understand that at this point this new bill may take time to make an overwhelming impact upon Alabama, but are more than confident that this will benefit Alabama as a whole as time passes. The idea is that not only will homeowners begin to improve their homes to get the savings, but the construction companies as a whole will start outfitting new homes in order to meet these requirements, which will automatically make these savings available to new homeowners as well. Not only is this beneficial to the homeowners, it will also improve the insurance market as many homeowners haven’t been able to renew their wind damage policies since 2004, after Hurricane Ivan ravaged the coast. 

    In light of the recent tragedy that struck North Alabama, it is more than evident that something like this is needed to be put into effect, as the victims that were devastated by the tornados were highly concerned that insurance companies would hold the lack of preparedness against them. Due to this catastrophe, the number of canceled insurance policies has risen drastically in North Alabama. Had this bill been active before the tornados hit, the outcome may not have been the same. Not only could this bill be an opportunity to provide an insurance discount to those that take advantage of it, but it will also help Alabamians have a peace of mind in the event of possible damage to their home, as well as help homeowners to recover quicker if something does happen. 

    While this bill may not fix all the issues that are out there, in regards to this topic, it is going to be important to follow the news for the next few months and see how things progress. Because as they say, “This is only the beginning.”

  • Oct 7

    My guess is that most people reading this said, “Well, yes I do!”  Some may have said, “The bigger the refund the better.”  But is that the best answer?  If you have a tax return with lots of tax credits then a big refund might be the right answer.  Credits such as the child tax credit, earned income credit, and education credits will make that refund grow.  However, if the big refund you usually get is solely due to the fact that you over withheld from your paycheck or paid in too much in estimated payments, the big red light is blinking “WRONG ANSWER!” If you pay Uncle Sam too much money during the year, then you are giving the government an interest free loan while they have your money. Why would you want to give your hard earned money to the government interest free? You probably don’t. Ideally, most people should want to break even with Uncle Sam. By doing this you are paying in enough taxes so that you do not pay anything in April but you aren’t giving any loans to the government. How do you break even with the government?  There are a few things you can do. They are the following: 

    1. Evaluate your withholding form (W-4) each year and determine what the best withholding situation is for you.  If you are currently allowed a child tax credit and a dependent care credit, you may be able to increase your exemptions.

    2. If you had an extraordinary taxable event one year and were given estimated tax payment coupons, you may not need to make those. If you sold a lot of stock and had capital gains that won’t happen this year, let us know and we can adjust that out of the estimated payments.

    3. In October, go to www.IRS.gov and use the withholding calculator to evaluate whether you have paid in too much or not enough.  Often, it is helpful to perform this task later in the year because things change. You may get a raise, have a child, or get married. This online tool will help you determine where you will be on your current year’s tax return.

    So, just because your friend or co-worker gets a big fat refund, doesn’t mean they are using their money wisely!