Welcome To Josh's Blog O' Thoughts: Latest Posts

Generally speaking, I've always found the energy efficiency federal income tax credits a bit confusing. To my knowledge, there are at least the two different tax credits available to home owners: the Nonbusiness Energy Property Credit and the Residential Energy Efficient Property Credit.


Nonbusiness Energy Property Credit

This tax credit allows you to recoup some of the money you spent to perform energy efficient upgrades to your home. The catch is that it must be an upgrade that is performed and not a new installation. For example, if you have your old windows replaced with new Energy Star windows, you should be able to take a credit, but if you build a new house, you won't be able to take the credit even if the windows used are Energy Star. Other items that are available for credits include insulation, lighting, heating and cooling, water heaters, and windows and doors. Every item has a maximum credit that can be taken. View the Energy Star website for more information.

What makes this credit even more confusing is that the credit expired at the end of 2007, but was then reinstated in October 2008 not to take effect in 2009.

From the 2008 Federal 1040 Booklet:
The credit for nonbusiness energy property has expired and does not apply for 2008. Form 5695 is now used only to claim the residential energy efficient property credit.

This means that you will NOT be able to take this credit for any energy efficient upgrades you made in 2008. So it really won't be usable on this year's tax return, but if you make any upgrades in 2009, you should be able to claim a credit for them when you file next year.


Residential Energy Efficient Property

This tax credit is available for installations of various Energy Star qualified, high-efficiency products. Items covered under this credit include solar energy systems, wind energy systems, fuel cells, and (as of October 2008) geothermal systems. The Emergency Economic Stabilization Act of 2008 that was passed in October 2008 not only reinstated the Nonbusiness Energy Property Credit (see above), but also expanded the Residential Energy Efficient Property credit to include geothermal systems. Even better, this credit can be used for new construction, AND can be taken for products installed in 2008! This is great news for people who installed a geothermal system in 2008.

This credit generally allows you to get back up to 30% of the investment expense in these systems. This year, the credit for each is capped at $2,000, but from what I understand, the cap will be removed starting next year allowing you to take a full 30% credit. This is even better news for people planning on installing a geothermal system in the next 7 years (expires in 2016).

To take the credit on line 53 of your 1040, you also need to file form 5696 with your return. Your total credit from this form may also be limited by your income or by some of the other credits you may be taking. Please review the instructions for more information.


I Am Taking The Credit

If you followed my blog closely, you would have seen that my family built a new home in 2007/2008 with the completion being in Jan 2008. You also would have noticed that we had a geothermal system put in for our heating and cooling solution. Since the house was completed and put into use in 2008, the installation date of the geothermal system is considered to be 2008. Therefore, I can take this credit on my 2008 return. I can get a credit of up to 30% with a cap of $2,000. This means that the total qualified expenses of the product and installation only needed to clear $6,666 to get me the full $2,000 (it easily cleared this mark). And since a tax credit drops straight to the bottom line, I’m happily I’m getting an extra two grand back from Uncle Sam this year.


Reference


Federal Form 1040 Instructions
Federal Form 5696 and Instructions
Energy Star Website
GeoExchange Website
WaterFurnace Website
About.com Energy Tax Credits
Wikipedia Article - Emergency Economic Stabilization Act of 2008
The Emergency Economic Stabilization Act of 2008

Disclaimer

I am not a tax professional, so this information should not be taken as tax advice. I'm simply stating my understanding of the situation.

Well in the past few days, one of my blog posts has made the distinct honor of being the first to have over 2000 views. Which of my popular posts was it to break this mark?

Was it the Gerber Viper Toilet Demonstration Video which linked to the very informative and sometimes slightly disgusting toilet demostration?

Was it the Tax Reporting For Employee Stock Purchase Plan (ESPP) post helping people figure out how to report gains and losses from their ESPP plans?

Was it the Gerber Allerton Toilet Review which was my own personal review of the Gerber Allerton toilet?

Or was it the The Easy Guide To The Digital TV (DTV) Switchover post which attemps to help people understand the conversion to DTV in layman's terms?


AND THE WINNER IS...

Tax Reporting For Employee Stock Purchase Plan (ESPP)

Granted, I this is a topic of seasonal interest. Last year, it got very high views in Febraruary, March, and early April, but it slumped off during the rest of the year. I assume I'll see the same thing happen this year as tax time comes to an end.

Well I'm not the type of person that just goes out and buys domain names willy-nilly in hopes of selling them to someone with an interest in the name. I only buy a name if I intend to use it.

Pantoozle.com was a project I started with a friend in 2006. It was originally supposed to be a site where people could post classified-type ads (mostly for free). We also built in a database which would allow users to rate and review local businesses.

Initially, the website was a big hit. We had lots of hits in the early days. Unfortunately, very soon after we opened our site, Craigslist.org opened a sub-site for our specific metro area. Craigslist already had a huge following and more or less killed the traffic to our site. Don't get me wrong, I love craigslist and use it myself, it just happened to nullify our little project.

So anyway, I've been holding on to this website for a while, but with no activity in the past year and half, I've decided to bring it down. I removed all the content and I am putting the domain name, Pantoozle.com up for sale.

So if anyone is interested in a kooky domain name that could be used for nearly any type of web site, contact me here: BreitTechnologies.com

Make an offer!

If you haven’t heard about the transition to Digital Television (DTV) by now, you've been living under a rock for the past couple years. My previous article, The Easy Guide To The Digital TV (DTV) Switchover explains what the transition is all about. If you are unsure about what the transition is, or how it affects you, you need to read that article.

Previously, the FCC and congress had mandated that all analog TV transmissions cease on February 17, 2009. At that point, people who were receiving analog transmissions over the air and had not appropriately prepared for the transition would lose television service. The hard cutoff date had also forced TV stations to prepare for the transition as well.

However, a bill recently passed (February 4, 2009) by both the Senate and the House will push the hard cutoff date back to June 12, 2009. The bill is currently awaiting the President's signature, but since he introduced the bill, it's almost certain that he will sign it. The thought process behind the bill is that the additional time will allow the remaining people to become prepared for the transition. Well I've got news for them: it's not going to work.

The Nielsen group estimates that there are still over 6 million people watching analog TV. Will this additional time get these people prepared? Probably a few, but in the end, it doesn't matter what date you pick for the cutoff, there are going to be people that are just not prepared. To be honest, with all the warning messages circulating around, if these people haven't prepared by now, they probably don't plan on becoming prepared by June either. Maybe they don't watch that much TV or they just don't care. Doesn't really matter what the reason is, there will still be lots of people unprepared in June.

You might be thinking: "This is great! I'm not prepared yet and now I have an extension!" Wrong! While the new bill does delay the hard cutoff date to June 12, the revised version of the bill (the version that passed) includes a provision stating that any local broadcaster that is fully prepared for the transition may shut down their analog signal BEFORE June 12! I can't imagine that there are many stations that aren't prepared already since they have been operating under the assumption that February 17 was the cutoff date. That said, I would imagine that a LOT of these stations would choose to cease their analog transmissions at the original cutoff date of February 17 to avoid the operating expense of transmitting two signals. I know all of my local stations are still switching on February 17.

So congress and the FCC have been saying for well over a year that the hard cutoff date is February 17, 2009. They have hammered that date into our skulls so many times with the onscreen messages and infomercial-like TV spots. And now, just 11 days from the transition date, there's a bill passed that states the DTV transition date has been pushed back to June 12, 2009. Undoubtedly, this will get media coverage. However, I doubt that the fact that individual stations have the choice to cut over early will get the coverage it needs. So come February 18, you might find yourself without TV when you thought you had until June 12.

And we thought it was confusing for people before! Way to go law makers!

Last year around this time, I posted an article about Tax Reporting For Employee Stock Purchase Plans (ESPP).

Last year, I learned the that there are specifically different rules for handling these types of capital gains/(losses) when compared with your standard stock transactions. My mistakes caused me to refile my tax returns (federal AND state) for the previous 3 years). I ended up getting about $1000 back so I didn't complain too much.

So this is just a reminder. If you sold any stock from an ESPP this past year, please follow the link above and read my detailed article on how to report this on your taxes. Also, you might want to take a look at using my spreadsheets which will help you calculate your gain/(loss) for these types of transactions. You can get the spreadsheets from the original post, or download them right from here:

I dedicate these two ESPP Tax Calculations files to the public domain so feel free to use them any way you wish.
ESPP Tax Calculations.ods - Open Document Spreadsheet format for OpenOffice.org
ESPP Tax Calculations.xls - MS Excel spreadsheet

Happy Tax Filing!

It has been quite an amazing decline from the record high prices we had in July 2008. In just the past 6-7 months we have seen oil come from upwards of $140 per barrel to as low as $33 per barrel. Likewise, gas has come from almost $4.00 per gallon (where I live) down to almost $1.50 per gallon. That's roughly a 75% decrease in oil prices and a 60% decrease in gas prices.

As I had said in the past, those high prices were well beyond the normal market changes for supply and demand. Likewise, this massive decline is probably more radical than supply and demand principles would dictate. While the massive rises in the past couple years have been fueled by fear of supply shortages and speculative buying, the recent declines, I believe, are also being exaggerated by fears of the global economy slow down.

It is my guess (granted, I'm not expert) that oil and gas prices will come back up until they find a point of stabilization. In my opinion, that will probably be around $75 per barrel for oil and $2.10 per gallon for gasoline.

That said, I'm definitely not complaining about the cheap gas. I'm just going based on what I've seen and read. I will be watching to see how these predictions turn out and I'm sure you'll see another post from me on the subject in the future. Until then, buy that gas while it's still cheap!


By the way, what's the lowest gas made it in your area? I think I saw about $1.55 here.

Winter weather is officially here again after! After just getting our first two real snowfalls of the year, I am again reminded of something that annoys the bajeebers out of me. This time, I am not referring to Snow Drivers and the 4WD God Complex.

Has this ever happened to you? It has just snowed, and your local streets crew has been at it for hours clearing the roads so you can get around. They've done a pretty good job and the street is basically clear of snow and ice so you are traveling along at a normal speed. All of a sudden you pass in front of someone's driveway and it sounds like your car has just hit an animal. On top of that, you lose traction for a second. What just happened? You continue on. You pass another driveway, and BAM!, the same thing happens. You look back and what do you see?

That's right, someone has shoveled, plowed, or (as is most often the case) snow blown the snow from their driveway out onto the street. This creates a sudden patch of bumpy, slippery snow on an otherwise clean street. In my opinion this can create an unsafe driving condition when it is entirely unnecessary. Just think of the slippage that would be possible if this happed on a curve or near a stopping point.

Not only is this a hazard, but I find that this practice is just plain rude. The people doing this obviously have no concern for drivers that may pass in front of their house. Nor do they have concern for their neighbor whose driveway will end up plowed in due to their extra snow in the street. They also, apparently, think that they are too good really take care of their own snow. They throw it out in the street in hopes that the city plows will come take care of it for them. These people are so rude, that they will often snow blow out to the street even as cars are passing! Yes, I have been hit with projectile snow while driving. That's just plain rude.

Lastly, I believe that most communities have ordinances against this type of behavior for the reasons listed above. So depending on where you live, this practice may also be illegal.

So it's unsafe and rude, but it's also not very environmentally friendly. When you throw your snow on the road, it will eventually be taken care of by a plow. Snow plows make large piles of snow all along the road. And in the spring, the snow melts and become Urban Storm Water Runoff. If you haven't heard of it already, urban runoff is a growing concern because it can overwhelm the destination streams and rivers. The water can not be absorbed by paved roads and must run into storm drains which eventually empty into streams and rivers that can't handle the influx of water and may flood. Unnecessarily adding to the amount of this runoff is not environmentally conscious.

But what should be done with the snow from their driveways? These people should do like 90% of other people and move the snow from their driveway to their yards. Yes, their yards. This would completely eliminate the hazardous driving condition and people would not longer think you were rude (at least not for your snow removal practices). On top of that, the snow that melts in the yard will have a much higher probability of soaking into the ground to replenish our ground water supplies rather then just running away to eventually end up in a river.

I can't be the only one who finds this annoying. If you do as well, let your voice be heard! Leave a comment to this post.

If you are a blow-into-the streets kind of person, perhaps you should consider changing your ways.

A question came to me the other day, as often they do, and I thought it interesting so I've decided to share it with you. First for some background.

Up until the end of this summer, there were concerns of rampant inflation in the US economy. The cost of nearly everything (fuel, commodities, food, retail) everything was on the rise. Generally speaking, the term inflation strikes fear in the heart of people. It generally is considered a bad thing because a dollar will no longer buy the same amount of goods as it would have before the inflation. However, there is a general consensus that some amount of inflation is a good thing, and that it is problematic when we have rapid bursts of high inflation.

In terms of money availability, inflation means that there is more currency circulating than there used to be. This dilutes the value of that currency. If it used to cost $1.00 for a loaf of bread, it now costs $1.20.

In a domestic-only economy, higher prices would mean higher revenues for the businesses that sell these products. With the higher revenues it is likely that employee wages will increase so that the company can retain good employees and stay competitive in the market. So, although prices of goods are going up, wages are increasing too. In a domestic-only economy, there would be a greater chance that prices and wages would increase relative to each other so that the products one buys still cost the same proportionally to their income.

Inflation really becomes a problem once you start to examine a global economy. If our country has rapid inflation, our currency will be devalued against the other foreign currencies. So for example, maybe $1 used to get you 1 Euro but now it takes $1.50 to get 1 Euro. That means we would be paying more for products that we import from other countries. In the domestic-only economy, the rise in prices is countered by the rise in income, but in a global economy that does not happen. The increased prices are all going toward monetary exchanges and not revenue for a domestic company thus there is no corresponding increase in wages.

Since the US deals in a global economy, it is apparent that inflation is something that could truly hurt us. Our dollar needs to remain strong versus foreign currencies or we hurt our economy.

So the question that occurred to me the other day was whether or not there were ways that rapid inflation could actually help the average person.

Of course, if you were making investments in currency against the US dollar you could make some money. But the average person does not have the understanding or funds to make this a reality.

Inflation certainly doesn't help your savings or idle money. If you have money in savings accounts, which typically come with fairly low rates of return, inflation will dilute your money faster than it can grow.

If inflation is also inflating your income, then it is a good thing for any fixed-rate debt that you might have. This would commonly be a home mortgage. If you have a 30 year loan with a fixed interest rate, then your monthly payment will never change. So if your monthly payment on day one is $1000 and your salary is $40,000, your monthly payment stays $1000 even when inflation increases your salary to $60,000. That is very helpful. Unfortunately, if we are currently in a rapid burst of inflation in which costs rise disproportionately to income, then this is no help.

What about people who invest their money in physical goods like art or other collectibles? These people might feel they are making a lot of money because their investment rapidly increases in value with inflation. However, they really are only making money at the same rate as inflation. While this is probably better than leaving your money sitting in a low yield savings account, you really aren't making any money, relative to the costs of everything else.

What about stocks? Stocks are a better way to keep your investments on par with inflation. And if lots of people understand this, the new demand for stocks will also increase their value above inflationary increases thus actually making you some money. But that's only assuming that there is a higher level of demand for stocks. However, the reverse may be true because with the increase of costs, people will have less extra cash to invest. So stocks could see a possible benefit, but only if demand increases as well.

So is there any single thing that can be good about rapid bursts of inflation? Is there any way inflation can help the average person make some money or reduce debt? While a modest amount of inflation is a good thing, right now, I'm not seeing any silver lining in rapid inflation. I'll keep thinking though, and if I come up with something I'll be sure to let you know. If you have any ideas, drop a comment.

Here's a couple shots of a butterfly I took this past summer at Inspiration Peak near Alexandria, MN. I just happened to get lucky that this butterfly landed on the clover right next to me and stayed long enough for me to take some good shots. As a side note, if you ever are in the Alexandria area, I highly recommend taking a couple hours and hiking up Inspiration Peak. Nice little place for nature and scenery.

These shots were taken on my Canon Rebel XT (350D) with a Sigma 70-300mm telephoto lens set at 300mm macro mode. Other technical information should be in the file properties. Click the links below for medium resolution images (I won't be hosting the original 8MP images on this site).

I hereby donate these files to the public domain so feel free to use them in any way you wish.


IMG_4974.jpg


IMG_4979.jpg

I'm sure everyone has noticed lately that gas prices have been coming down. In my part of the country, we are almost back below $2 per gallon. (I still can't believe we're happy to be paying $2 per gallon). Part of the reason for the decrease in gas prices is the decrease in oil prices. Oil topped out somewhere around $140 per barrel back in July. It is currently trading around $65 per barrel. That's about a 50% decrease in just a few months.

So what about all these people that a few months ago said oil would NEVER come back down below $100? They said that oil prices going up was purely a function of increased demand and stable supply. Well some of us (myself included) disagreed. Check out a few of my previous blog posts:
More Signs Of Oil As The Next Big Market Bubble - June 16, 2008
Are Crude Oil Prices A Bubble Waiting To Burst? - November 7, 2007

My take on the situation was that while there probably was some increase due to demand, the increase in oil prices was disproportionate to the demand increase. This led me to believe that investors were throwing their money into oil to try to make a quick buck. It's one of the things we do best in this country. We see someone else get rich and we copy them so we can also get rich. Eventually TONS of people are involved in the same investment plan. But when we find out that most of the people buying are just get-rich-wannabes, prices collapse. In recent history you could easily refer to the housing market bubble, or the tech industry bubble.

So, I hate to say it, but...

"I told you so"

It's pretty obvious now that a huge portion of this price increase was due to speculative buying by investors. Check out this interview with Scott Bleiler, president of CreateCapital.com. He claims the price increases were solely due to speculative buying. I won't go quite that far. While I do think that maybe 90% of the price increase & decrease was due to speculative buying, I also think prices were also moved a little by changes in demand and the strength of the US dollar. But again, spec buying was the largest part.

Now that I got that out of the way, I can comment on how annoying OPEC is. When prices where out of control this summer, we were practically begging OPEC to increase supply to help lower prices. Their evaluations showed that supply and demand were matched fairly well so they did not increase output. Now that prices have come back to reasonable levels, they decide that they liked it better when they were getting $100+ per barrel so they've decided to decrease output. That is a pretty obvious slap in the face to us. I'm so glad that the recent ncreases in the strength of the dollar helped nullify their supply reductions to meaningless. It literally had no effect on the price of oil. Yet another indication that the price of oil does not move based solely on supply-demand.

That pretty much sums up how I view the whole oil market situation over the past 2 years. Now when will prices of other goods (food, retail, air travel, etc) that went up "due to the increase in fuel costs" go back down? Not any time soon is my guess. Many retailers tried to wait as long as possible to raise prices. This means some may have taken significant losses during those periods. As a result, they will probably be hesitant to reduce prices so they can recover some of those losses. And good luck for airfare. The only way that will come back is if one of the airlines starts a fare war.

To conclude this post, I just want to say that it was a great marketing ploy run by Chrysler this summer. Buy a new car and they would guarantee you $3/gal gas for 3 years. They got a person to buy a car with this deal in mind and now they don't have to pay anything out for it. Great job marketing, Chrysler.


If you want to leave a comment, I'd be interested in hearing what gas prices are doing in your neck of the woods.