Any way to legally reduce household income in Pennsylvania through charity/donations?

Submitted by erock255555 t3_10gd3y6 in Pennsylvania

My household sits at just about 151 percent as compared to my counties average income. My understanding of the Inflation Reduction Act is that if I made around $2k dollars less per year, I would be at 150 percent and then qualify for $8k instant rebate on the heat pump I am about to purchase as well as a multitude of other things that it appears you qualify for if you are at 150 percent household income or less. I'm trying to navigate HUD legalese and other federal documentation on how average household income is calculated per county and I'm coming up with no way of reducing it outside of asking for a direct pay cut. My job is salaried so it isn't like I can just pick up less hours. Does anyone have any idea about navigating something like this or am I shit outta luck by making $2k too much? I understand the cutoff has to be somewhere but it is a bit frustrating that I'd be financially better off if I made a bit less. I also find it strange that they do this by household and not factoring in dependents at all. Someone making $2k less than me but living alone would qualify while I do not supporting a family of five.

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KREDDOG79 t1_j521a9s wrote

Put more into 401k

If your job has a Health Savings Account it comes out pre tax.

Donate to eligible charities that are tax deductible

You may want to find a CPA to help you plan this out

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boringreddituserid t1_j5258mg wrote

401K contributions are taxed in PA. Distributions, including all gains are not taxed by PA.

I don’t think charitable contributions are deductible either.

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sandmanrdv t1_j536jwh wrote

The only way 401(k) or other qualified retirement plan contributions would be taxed is if we are talking about a Roth Plan.

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boringreddituserid t1_j538rpj wrote

That’s not correct. Many states including Pa tax the contributions, but withdrawals are tax free. Whereas other states don’t tax contributions, but do tax withdrawals.

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sandmanrdv t1_j53bhus wrote

Ah we’re talking state income tax here. I stand corrected.

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Jumpy-Natural4868 t1_j5hh9bl wrote

Correct OP could fund a 529. That's PA.tax deductable. Up to $15k per person for tax year 2022 until April 15.

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Maumee-Issues t1_j527lfr wrote

Yo double check as wording is weird and I just helped my dad understand it as he is around 151 too. There are two separate programs for tax credits. One which is not income based, but the other one is.

The 1st one is the energy efficient home improvement credit which is explained here: https://assets.ctfassets.net/v4qx5q5o44nj/3FYfJiYMILiXGFghFEUx0D/39c998988d5bea13ae015bddeeba1d59/25C_25D_Fact_Sheet.pdf

This one is available to all homeowners and isn’t income limited. It still gives 30% credit.

The 2nd one is the new high efficiency electric home rebate program. This is a bit of a broader category will extra rebates and is the one that is income limited. Here is a good fact sheet: https://assets.ctfassets.net/v4qx5q5o44nj/7LiHS6hhVKaIdph8bdVV8b/fbac70d0d6e74ce7a467ad526d47af29/HEEHRA_factsheet.pdf

Main site where I got these fact sheets: https://www.rewiringamerica.org/ira-fact-sheets

TLDR: you should be able to still get a 30% tax credit for your heat pump under the first one I mentioned. Of course double check the documents though as it explains it well. The income based one is a bit more extensive in coverage though.

Ps. If you already looked into this and I’m mistaken or interpreting it correctly let me know. I just know it was a pain to understand. I also realize it’s capped at 2k so if that’s what you are mentioning I get it.

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analmartyr t1_j524tyj wrote

What are you basing this 151% on? Is this based on your salary, w2 or year end pay stub?

Are you looking to reduce for tax year 2022 or this year 2023?

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erock255555 OP t1_j526la9 wrote

The %151 is based on 2022 W2 gross wages plus the percentage raise I received for this year compared to the estimates HUD has out for 2023 for average household income per county. Final numbers from HUD won't be posted until May because COVID delayed their procedures. Looking to reduce for 2023. Considering this is instant rebate and not tax credit stuff I'm wondering if they want you to compare your 2022 earnings verse the 2023 average household income numbers. It's all very confusing to me.

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bitterbeerfaces t1_j53mui8 wrote

Charities are no longer tax deductable on federal taxes unless you itemized

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str8outtaconklin t1_j52rjcd wrote

Not really…there are basically no deductions for PA income aside from Section 125 deductions from payroll and contributions into a PA 529 Plan. PA is a flat tax State unlike most other states and the Federal government.

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Mijbr090490 t1_j52its8 wrote

I'm hoping they go off of 2022 W2. I got a quote for a heat pump just to get an idea of what we will need set aside. Told the guy I wanted to wait until there is more information released. They are a very large HVAC company and had no idea about the HEEHRA rebates or how they work. Hopefully more information is released soon. I want to pull the trigger but their are so many variables. I don't want to miss out on possible rebates.

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Domin717 t1_j5cd78e wrote

Ira and/or 401k is always the best way to take it down

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flaaaacid t1_j520gu2 wrote

Is your 401k already maxed out at 22,500? If not, contribute more. That comes off your MAGI.

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boringreddituserid t1_j52539x wrote

401K contributions are taxed in PA. Distributions, including all gains are not taxed by PA.

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flaaaacid t1_j528xdd wrote

Are they using PA's definition of taxable income for a federal program? I doubt it.

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[deleted] t1_j529qnv wrote

Which is a shame in my opinion. I don’t think people should be penalized for doing something responsible like saving for retirement.

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boringreddituserid t1_j52d64p wrote

Think of it more like a Roth 401K for PA purposes. I’m retired and it’s nice not paying PA tax or local income tax.

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IamSauerKraut t1_j57a368 wrote

Get a lawyer. They'll take 1/3 of what you win.

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familyrideday1 t1_j52eva9 wrote

Hey folks, How can someone please explain this coming of language and texts… I will do my part to look into the inflation reduction act more, and spend time talking to an accountant for a desired verbal discussion to be in on the loop.

Thank you, I hope The Pennsylvania group on here is working as a whole to take advantage of new bills signed through executive and legislative format. :)

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