Home Improvement Tax Credits Explained: A Homeowners’ Guide to Securing Tax Credits
Contributed By: BAG EditorsAlthough this site is usually dedicated to backyards and gardens, we figured that every backyard and garden has a house attached to it, and therefore can benefit from the information included in this article! Because you probably own a home, we wanted to make sure that you don’t miss out on the home improvements that could qualify you for at least $1500 this year (sometimes even more.)
As we all know, filing tax forms in America causes countless headaches. Many of us struggle with the difference between a “tax credit” and a “tax deduction” and what they really mean. Over the past year, the government has passed several laws that reward homeowners when they purchase energy-efficient home improvement products. Like many other government programs, they come with red tape and requirements. Well, luckily for you, Moonworks has cut through all of the legal mumbo-jumbo and condensed the information into an 11-page downloadable guide, walking you through (and decoding) the fine print product by product, called Home Improvement Tax Credits Explained.
In this guide, you can learn the difference between a “tax credit” and a “tax deduction”. Additionally, explore tax credits from your national and state government that can save you money on energy-efficient products like windows, doors, roofing, insulation, water heaters, solar energy, and more. See below for an excerpt from the guide.
“Through The Emergency Economic Stabilization Act of 2008 (the “Bailout Bill”) and The American Recovery and Reinvestment Act of 2009 (“Stimulus Package”) the federal government is making a significant investment in reducing energy use in the nation’s housing stock. The 2008 Act expanded and extended residential renewable energy tax credits, while the 2009 Act added a tax credit provision for energy efficiency upgrades. When taken together, these two Acts are making it much easier for consumers to both reduce household energy use and switch heating and electrical systems over to renewable energy.
The term, “tax credit” is often confused with “tax deduction”. A tax deduction is a line item like the personal exemption which results in a reduction in taxable income. For example, someone reporting $40,000 as income can deduct the personal exemption of $3,650 from income, resulting in a taxable income of $36,350. This person would be in the 25% tax bracket, so the personal exemption of $3,650 only results in an actual savings of $912.50 (25% of $3,650). On the other hand, a tax credit is a reduction in taxes owed…”
The guide goes on to explain the different rules and regulations regarding various home improvement projects, and how you can qualify for tax credits. For example, here is some info they provide about central air conditioners:
Central Air Conditioners
• National Tax Credit Amount: 30% of the product’s cost up to $1,500. Labor and installation costs can be included if the labor costs are directly related to the onsite preparation, assembly or original installation of the central air. The tax credit cannot be allocated towards a future tax year.
• Criteria for National Tax Credit: The central air must be on an existing primary residence home, as rental property and new construction do not qualify for the credit. For split systems, the HSPF must be 13 or greater with a SEER of 16 or greater. For package systems, the HSPF must be 12 or greater with a SEER of 14 or greater.
• Timeline: The tax credit does not correlate to the date the central air conditioner is purchased, but rather the date it is ‘placed in service’. The central air must be installed and in working condition between January 1, 2009 and December 31, 2010.
Do you know what U-Factor your replacement window needs to be to qualify for a tax credit? Do you know what a U-Factor is? No? Then download the free guide, Home Improvement Tax Credits Explained now.
This guest post has been contributed by Damien Cabral of Moonworks Home Improvement.
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