While most home improvement expenses do not have a tax impact in the year they are incurred, there are some significant exceptions, and those exceptions change each year. Read on to find out the latest in government tax credit programs.
In 2009 and 2010 the Federal Government is allowing homeowners to deduct 30% of the cost (up to a total of $1,500) for certain energy efficient home improvement products on existing homes. That means you can spend up to $5,000 on products and get tax credit worth 30% of the cost, or $1,500.
Here are the Simple Rules to Follow:
o The items you purchase must be installed during 2009 or 2010, which means the tax credit can be claimed in April 2010 or 2011.
o The items must be installed in your principal residence, not a rental or vacation home.
o The items must have a Manufacturer Certification Statement to qualify.
o Beware, because NOT ALL Energy Star rated products qualify. To find the list of what does, visit the government link included here.
o You will use IRS form 5695 which allows individuals to claim credits for making their residences more energy-efficient.
o Save your receipts and the Manufacturer Certification Statement. You will need them if you are audited.
What Qualifies for the $1,500 Tax Credit?
The government is not allowing the tax credits unless the products meet certain energy criteria (which have increased in strictness this year), and have a Manufacturer’s Certification Statement. A Manufacturer’s Certification is a signed statement from the manufacturer certifying that the product or component qualifies for the tax credit. The IRS encourages manufacturers to provide these Certifications on their website to facilitate identification of qualified products. Taxpayers must keep a copy of the certification statement for their records, but do not have to submit a copy with their tax return.
Here is the list of home improvement items that qualify:
o Windows and Doors
o Roofs (Metal and Asphalt)
o Water Heaters (non-solar)
o Biomass Stoves
o Installation costs are included in the total item cost for HVAC, Water Heaters, and Biomass Stoves.
o Installation costs are NOT included for windows and doors, insulation and roofs.
Even Bigger Tax Credits are Available
If you are planning a major remodel between now and 2016, the government is giving a tax credit on 30% of the cost for certain energy efficient items with NO UPPER LIMIT. That means you can claim up to 30% on expenses that total in the tens of thousands. The other benefit is that these credits are available on new home construction as well, not just existing homes.
Items included in this more generous tax credit are:
o Geothermal Heat Pumps
o Solar Panels
o Solar Water Heaters
o Small Wind Energy Systems
o Fuel Cells