American Recovery and Reinvestment Act of 2009

The home construction and remodeling business is in the worst economic times it as ever been in. Builders, subcontractors, suppliers and workers have or are facing bankruptcy. Layoffs in the building industry are at all time high and not much recovery in sight. Businesses are doing about anything they can to survive. Some very creative advertising is showing up everyday, encouraging people to build or remodel. This desperate advertising is being centered on the new American Recovery and Reinvestment Act of 2009.

On February 17, 2009 President Obama signed the new American Recovery and Reinvestment Act of 2009 or referring to new energy tax credits. Many have jumped at this to entice people to upgrade to new energy efficient products and earn tax credits back. This plan does provide home owners with some good incentives to upgrade.

President Bush had this energy tax credit in place, which was to end in 2007, but was extended through 2008. The new 2009 plan has many great improvements. Going from a 15% of material rebate in 2007 to a 30% rebate on material in 2009. The new plan increases the rebate from a $500 cap to a $1500 cap. But this is where the home owner needs to read the fine print.

Some of these desperate businesses are advertising that you may be able to get new energy efficient products installed and not have to pay a dime. Now is some cases this may be true but not with all. Installation is not covered with many of the products.

Installation costs ARE COVERED for:

• HVAC (Heating, Ventilation and Air Conditioning) systems
• Biomass Stoves
• Water Heaters (including solar)
• Solar Panels
• Geothermal Heat Pumps
• Wind Energy Systems
• Fuel Cells

Installation costs are NOT covered by the tax credit for:

• Windows
• Doors
• Insulation
• Roofs

Now this is just for existing homes upgrading to energy efficient products that pass the Energy Star rating. This is not for new home construction. If you are building a new home, you can qualify for the tax credit for geothermal heat pumps, photovoltaics, solar water heaters, small wind systems and fuel cells, but not the tax credits for windows, doors, insulation, roofs, HVAC, or non-solar water heaters. Builders are eligible for a rebate on new homes that are 50% more energy efficient than the 2004 IECC.

This tax credit is for all products placed in service in 2009 & 2010 for most home improvements, EXCEPT for geothermal heat pumps, solar water heaters, solar panels, fuel cells, and windmills which are not subject to this cap, and are in effect through 2016,

So as you hear these promotions to upgrade your home or build a new home, check on Energy Star’s website to make sure you will get the credit that is being explained to you. Also remember that this is a rebate on your tax return, so you will be waiting until the following year to get it back. Yes these rebates are real and are good to look into, just don’t get sucked into the desperation sales that are happen right now.

by Steve Feller

Blogger at Green Building Ideas. I have worked in the building industry for over 20 years and now spend most of my time promoting, training and helping others with Building Green and more energy efficient. Green Building will be the future of building.
Read more from this author at http://greenbuildingideas.info

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Recently President Bush signed into law the Emergency Economic Stabilization Act of 2008 which, among other economic incentives, extended the tax credit available for energy efficient home improvements. Home owners that are in the midst of planning to make improvements to their homes can do so in 2009 and receive tax credits for improvements that are deemed to make the home more energy efficient.

While the purpose of the bill was and will always be to lessen the blow of the recent economic downturn, one must look deeper to see the many advantages it provides to the common household through tax credits. Anyone who is planning to undertake home improvements should consult the details of the bill to see if the changes they are making qualify for tax credits.

One of the main focuses of the home improvement tax credit portion of the bill was to encourage people to change their roofing material from heat-absorbing, energy-wasting shake and shingle to a substance that reflects heat and reduces energy consumption, such as a reflective metal roof.

The advantage of a change to metal roofing is that it reduces the home’s consumption of energy by requiring less energy to cool the home in the summer, as the steel roof reflects heat instead of absorbing it. A second advantage comes with the fact that since the heat is immediately reflected back into the atmosphere it reduces the occurrence of smog and urban hot zones in populated areas.

Those who need to replace their roofs in the next few years should consider upgrading to a steel roof in 2009 to take advantage of the tax credit before it expires. Homeowners who add a metal roof that is ENERGY STAR qualified can get 10% of the cost refunded, up to $500. That’s a pretty significant savings.

To qualify for the tax credit the steel roof must be put into service between Jan 1 – Dec 31 2009, a manufacturer’s certification statement is required, along with IRS Form 5695. According to the bill the roof qualifies if it is: “…any steel roof…installed on a dwelling unit, but only if such roof has appropriate pigmented coatings or cooling granules which are specifically and primarily designed to reduce the heat gain of such dwelling unit”. So essentially you are looking for a coated steel roof which meets the ENERGY STAR program requirements.

Check with your Absolute Steel representative to see which of our metal roofing materials qualify and save some money!

While some may not consider 2009 to be the best year for major expenditures on a home, if your home is in need of a roof soon regardless you should think about upgrading your roof in the next year to take advantage of the tax credit savings. Not only will you save money on the roof itself, but every year your metal roof will give you back up to 40% in energy savings due to reduced cooling costs. You should also keep in mind that when you spend money on your house you are also helping to stimulate a lagging economy, and every little bit helps.

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Visit www.MetalRoofingSource.com to learn more on the benefits of metal roofing.

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You might be aware that President Obama’s Recovery Act of 2009 contains a number of tax credits and other incentives for various green and renewable energy home improvements. For example, the Residential Renewable Energy Tax credit will help fund up to 30% of a major home renovation, such as installing solar panels to power your home. However, installing solar panels is a major financial investment that will take years to repay. For homeowners not ready to make that kind of investment, consider taking advantage of the Home Energy Efficiency Improvement Tax Credit instead.

The Home Energy Efficiency Improvement Tax Credit provides up to $1,500 for home improvements that increases a home’s energy efficiency. Amongst other things, this tax credit covers upgrades in your appliances – including your water heater.

Why is the government interested in helping you make this upgrade? Traditional tank heaters consist of an astounding 14 – 25% of your home’s total energy consumption.

Non-solar tankless heaters are one of the appliances covered. For a tankless to be eligible, it must have an Energy Factor (EF) of at least 0.82. (Note that most models of Paloma and Noritz meet this requirement.)

How to Apply for the Tax Credit

If your tankless heater was “placed in service” (that means it was available for use) in 2009, you can claim it in your upcoming 2009 taxes. You’ll need an IRS Form 5695 to fill out and submit with your 2009 taxes. You can find this form on the IRS website. On your standard IRS 1040 form, you’ll claim the credit on line 52.

If your unit wasn’t available for use until 2010, you’ll need to wait until next year’s tax season to claim it.

Don’t forget to save the receipt for your purchase. You’ll also want the Manufacturer’s Certification Statement – a signed statement that certifies the product qualifies. You don’t need to submit your receipt or the certification statement, but you will need to keep it in case you’re ever audited.

2011

Visit TanklessHotWaterHeaterInfo.com to learn more about tankless hot water heaters, including who makes the best tankless water heater, what things to consider when you compare a tankless water heater, installing a tankless water heater and Energy Star Tankless Water Heater Rebates.

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In the United States, certain “qualified” home improvements may reduce your tax bite when it’s time to sell your house and some could allow you to take an immediate tax credit, but some of those same improvements could also raise your property tax bill by triggering a reassessment of your property’s value.

Fortunately, a property tax increase caused by a home improvement is typically outweighed by your increase in equity, higher resale value and possibly a reduced tax bite – not to mention your enjoyment of the improvements.

Capital Improvements

Capital improvements are those home improvements that may ultimately help reduce your taxes.

Qualifying improvements are improvements that increase your home’s overall value or prolong the life of the structure. That includes: insulation, new heating and/or cooling systems, a fence, a driveway, adding a garage or carport, adding a new room(s), additions, a swimming pool, landscaping, a porch or a deck, built-in appliances, a new roof, etc.

Repairs, maintenance and upkeep typically don’t qualify as a capital improvements. These include such things as: plastering, painting, wallpapering, replacing broken or cracked tiles, fixing minor leaks, patching your roof, repairing broken windows, and so on.

The moral of the story is; whenever possible, replace instead of repairing because capital improvements increase the homeowner’s cost basis in the residence and may reduce taxes.

(To get more information about what is considered a capital improvement see U.S. Internal Revenue Service Publication 523 “Selling Your Home” and the publication’s correction, “Notice 1221.”)

Your Cost Basis

The cost basis of your home is used in the calculation to figure your capital gains tax. It isn’t as simple as subtracting the sale price from the purchase price.

You first start with the original purchase price, add your closing costs, add any fees for title insurance and/or legal services, and the like. Loan acquisition costs cannot be included. Then add the cost of “qualified” home improvements.

Any insurance proceeds received for theft, storm damage, and other casualty losses would be subtracted, then any costs to rebuild or replace would be added back. You also must subtract any deferred gain from previously owned houses and subtract allowed depreciation for any portion of the property that was used and claimed for business purposes. The net result is your new or adjusted cost basis.

To determine the taxes, subtract the adjusted cost basis from the sales price, as well as selling costs (real estate commissions, legal fees, etc.).

Provided they are completed within 90 days of your sale and provided they were completed to make the home more saleable items otherwise considered repairs (such as wallpapering, painting, planting flowers, maintenance, etc.) can also be classified as selling costs. So from a tax perspective this is a good time to perform those repairs.

The difference between the adjusted cost basis and the sales price is your capital gain of which $250,000 ($500,000 for joint filers) is currently excluded from taxes.

Home Energy Efficiency Improvement Tax Credits

Consumers who purchase and install specific products in the home, such as windows that are energy-efficient, roofs, insulation, doors, and heating and cooling equipment can receive a tax credit of up to $500 beginning January 2006.

The legislation providing these credits, known as EPACT, also provides a credit equal to 30% of qualifying expenditures for the purchase of qualified photovoltaic property and for solar water heating property used exclusively for purposes other than heating swimming pools and hot tubs. The maximum credit is $2000.

Improvements must be installed in or on the taxpayer’s principal residence in the United States. Home improvement tax credits apply for improvements made between January 1, 2006 and December 31, 2007. Recently, a bill has been submitted to extend this program.

As always, check with your accountant to see how these regulations and any new changes in the code may affect you.

Learn more about home improvement projects by visiting http://easyhouseremodeling.com, a popular house remodeling website that offers information, tips and free house remodeling resources and home improvement advice.

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Buying a more energy efficient furnace for your home can save you a lot of money on energy bills, but it takes time for the utility bill savings to add up to the initial outlay cost of the new furnace. Since energy efficient furnaces are good for everyone (less pollutants, less demand for fossil fuels) the federal government provides tax credits for the 2009 and 2010 tax years to incentivize their purchase. This article will discuss the extent of these credits, how to qualify for them, and how to collect them.

First let’s clear up what a ‘tax credit’ is since it causes a lot of confusion. When you earn income the government uses a bunch of complicated formulae to figure out how much in taxes you owe them. After that number is calculated, a tax credit directly reduces that number by the amount of the credit. No matter what else you do, though, the maximum amount of tax credit you can get is the amount of taxes you must pay on your income. This doesn’t mean you can’t get money back from the government, it just means you can’t get more back than you paid to them. Consider getting a $1,500 tax credit in each of these scenarios:

• If you made $50,000 in a year and have already paid $6,000 in taxes but the government says you must pay another $4,000, your tax credit would reduce the amount you owe by $1,500 to $2,500.
• If you made $50,000 in a year and have already paid $9,000 in taxes but the government says you must pay another $1,000, your tax credit of $1,500 means that the government now owes you $500 and will send you a check.
• If you made $25,000 in a year and haven’t paid any taxes and the government says you owe them $1,000, your tax credit of $1,500 reduces the amount of money you owe the government to zero, but they will not give you the remaining $500.

Ok, that out of the way, let’s discuss how you can earn that tax credit. When upgrading a gas furnace, there are generally two components to be replaced, the furnace it self and the circulation fan that forces air throughout your home. Since the achieving ultra high efficiency rates of newer furnaces requires what is known as an ‘advanced technology main air circulation fan’, you are probably going to have purchase them both. For a natural gas or propane furnace the determination is simple: if the furnace has an annual fuel utilization efficiency (AFUE) rating of 95% or more then the furnace qualifies for the rebate. The circulation fan’s requirement is a bit more confusing: the energy it uses must account for less than 2% of the furnace’s total annual energy used. The Department of Energy has specific test procedures in place to establish what qualifies. Your furnace salesman and/or serviceman will be able to show you these numbers.

Assuming you meet both of those requirements, the tax credit you are entitled to is 30% of the total cost of the furnace and fan including installation costs. If only one of the components meets the requirements you must get your installation expert to itemize your bill for installation of each component since you can only claim the credit on the installation of the qualifying component. Regardless, the credit is capped at $1,500.

This $1,500 cap comes under the general cap for energy efficiency tax credits for 2009 and 2010. So not only does this mean that you can only collect this credit once in the 2009 and 2010 tax years, it means it is a common credit with other energy efficiency purchases you make (e.g. windows, doors, insulation, water heaters).

In order to claim your tax credit, you will need to file IRS form 5695 along with your taxes. Additionally, make sure to save all of the relevant purchase and installation receipts as well as the signed Manufacturer’s Certification Statement with your tax records. Often these statements are available online from the manufacturer’s web site.

Find out more about Gas Heaters. Visit the Gas Heaters Guide.

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When you are considering doing some work on your property, you need to consider whether it will fall under the category of home repair, or home improvement. This is a crucial distinction because home improvements are tax deductible, whereas home repairs are not.

So what constitutes home improvement? In its basic form, it is any task that will add to the quality and therefore the value of your home. Such tasks would include putting up a new fence, installing a new driveway, complete kitchen remodeling, extending your property to add a room, building a swimming pool or garage, constructing a deck or porch, adding insulation, installing new heating or air conditioning systems, replacing the roof, or re-landscaping your yard. All of these tasks will require capital expenditure, but will add to the value of your property and increase the equity in your home.

Home repair, on the other hand, is a task undertaken to prevent the decline or decay of your property, and a subsequent drop in value. The task is necessary to maintain your home to its existing standard, without making significant additions or improvements. Home repairs include repainting or decorating, fixing leaks or breakages, repairing cabinets and replacing fixtures that no longer function.

Generally expenditure on home repairs cannot be used to obtain a tax benefit. However, there is a possibility that you could incorporate your repairs into a home improvement project and still gain a financial advantage. If you were undertaking a large remodeling task, you would be doing a lot to improve your property and increasing the value, and if you were doing some repairs as part of this project, expenditure for the whole task could be tax deductible. In other words, next time you plan to add an extra room to your home, be sure to fix the leaky roof at the same time!

If you require refinancing to pay for your home improvements, you may be advised to wait for a drop in interest rates. If you obtain refinance and use the capital for home improvements, you will be able to deduct the loan points in that same financial year. If you choose not to use the capital to pay for home improvements, the points will be deducted over the term of the loan. If you use only a portion of the loan for home improvements, then your possible deduction is also proportional. The rest of the points will be deducted during the term of the loan. Any points not deducted by the final payoff date of the loan will be cent per cent deductible in that year.

Before you start work on your home, you really need to understand the various distinctions that allow or disallow tax deduction. You can then make a decision whether it would be financially prudent to expand your project beyond simple repairs to increase the value of your property and ensure your expenditure is tax deductible.

Peter J. Wilson continually makes papers on topics associated to kitchen remodeling and cabinets. Recording his experience in works on home improvement and remodeling the writer expressed his know-how in the area.

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Going solar is all the rage these days with massive financial incentives fueling the fire. Here’s a little trick to write off an additional part of your solar system purchase.

Financing Your Solar Improvements

Improving your home with a solar panel system is financially advantageous these days. The federal government, most states and even cities throw financial breaks at you to promote going solar. With the federal government, you are going to get a $2,000 tax credit, a figure that is subtracted from the amount of tax you owe the IRS at the end of the year. States pursue a variety of plans, but most offer rebates wherein they actually pay for part of your new system. Cities also offer rebates, often by discounting your property taxes.

On top of all of this, you can take advantage of net metering laws in a majority of states. Net metering simply means you can sell your solar electricity to the local utility when you aren’t using it. Known as being on the grid, nothing is more satisfying than watching your utility meter run BACKWARDS during the day! As you might imagine, this has a nice impact on your utility bill at the end of the month.

There is one additional financial trick many people fail to take advantage of when it comes to writing off solar panels and such – financing. Even if you have the cash in your hot little hand, you should consider taking a home equity loans or refinancing your home to pull out cash to pay for the system. Why? The mortgage interest deduction! Improvements to your home are deductible if they are incorporated into your mortgage payment.

Now, you might be rolling your eyes contemplating regarding going through the refinancing process. Don’t. Many federal mortgage institutions are required to write financing for people wanting to improve their home with solar systems. Even better, most of the loans are written at interest rates well below current mortgage rates.

If you are considering doing a solar-based improvement to your home, talk to your lender about financing options. Take advantage of this strategy and you’ll be getting a mortgage tax deduction, tax credit, rebate, property tax discount and selling power to the utility company when you go solar. With so many financial incentives, you have to ask yourself whether you can afford not to go solar.

Rick Chapo is with SolarCompanies.com, a directory of solar energy companies. Visit us to read more articles on solar power and renewable energy.

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Our home is something that we all cherish more than almost everything else in our lives. This is a place to live in. and besides giving us shelter from all physical calamities it also gives much more. Unfortunately when you have a home you also have a whole other arena of tax issues to deal with. Taxes are scary and you may have felt as if the whole roof has fallen down upon your head. If this sounds familiar then you need to take a deep breathe, there are all kinds of great tax deductions that you can take to the bank! In fact your home can be a pretty spectacular tax shelter all on its own.

For example, you can deduct some of the interest on your Home Equity Loan or your Line of Credit. Unfortunately, the IRS has placed a limit on the amount that you are able to deduct.

And that is not all; a Home Improvement Loan is the best way to deduct your interest from your taxes. Although, there is no dollar limit on this deduction, the loan must be taken on ‘capital improvement’ rather than ordinary repairing services. These ‘capital improvements’ can include things like new fencing, a new drive-way, new additions, swimming pools, a garage or even a new roof and these are just a few of the many things that you can get.

Everyone’s home can use a little improvement and it is easy to find out just what kinds of tax deductions you can use for this kind of purpose. There are even some books that you can get to help you find out what you are eligible for as well as many different computer programs. The key to successful tax deductions is to have the knowledge on your side.

Kory Elgar writes about business and finance for http://taxdeduction101.info Read more about home and business tax deductions/.

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Many home improvements are capital improvements. The Capital Improvements are tax deductible according to IRS if the home improvements meet a number of conditions. The home improvements are permanent addition to the home that increases the value of the home. Hence, the home improvements are substantial in which the value of home property appreciates, the life of home property prolongs, and the functionality of home property increases.

For example, placing a fence, adding a room, installing a driveway, implementing a swimming pool, installing a new roof, setting a new built-in heating systems are capital improvements.

The capital improvement increases the value of your home. For example, adding a new room increases the value of home. The new room increases the ability of the property to earn more income. Thereby, the value of home property increases as well.

Another example, adding a garage increases the value of home. Renters will pay extra for a parking space. And again, the new garage increases the ability of the property to earn more income. Thereby, the value of home property increases as well.

On the other hand, the home repairs are not home improvements according to the IRS. Repairs are expenses that keep the property in good repair. And, the rental property owner can claim the as expenses on the year that the expenses are made.

For example, repainting the walls, patching the roof, installing the wallpaper, replacing the carpet, sealing the links, and repairing the windows are home repairs.

To be able to claim capital improvement tax deductible, the homeowner needs to use the Depreciation Method. The Depreciation Method is a way to recover the cost of capital improvements thru depreciating the expense over the life expectancy of property.

Dennis Estrada is a webmaster of mortgage calculators, and increases the value of your home website which calculate the monthly payment, bi-weekly payment, affordability, refinance, annual percentage rate, discount points, and more.

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In some situations you can take home improvement deductions on your taxes. This is a subject that is quite debatable, though, as standards and regulations are not too clear. What this means for the home owner is that it is best to just do home improvements because they need to be done and will add value to your home, not because you will get a tax deduction. However, there may be some very nice deductions you can take as an added bonus.

Spelling it Out

Getting a tax deduction for home improvements is a great deal. Home improvements will raise the value of your home so you are already getting paid to do them and with the added tax deduction, you are getting even more money in your pocket. Home deductions are not very easy, though. There are many reasons you can and can not take such deductions.

One reason for a deduction is medical reasons. If you must make changes to your home for a medical reason, such as widening doors for handicap access or installing an air conditioning for someone with breathing issues, then you may be able to take a deduction. This falls under the general deduction available for medical expenses. When you spend out over 7 percent of your income on medical expenses you get a tax deduction and that includes money spent on home improvement done for medical reasons. You may also get a deduction is you have to do remodeling for business needs. If you run a business out of your home then certain projects may qualify under business tax deductions. If you need to build an office or add a restroom for business needs, then this may qualify as a business expense That you can take as a deduction. In some cases you can also get a deduction for converting your home over to solar power. This is part of a move to try to reduce dependence on our current energy sources in favor of new, cleaner energy sources.

The bottom line is that there are an array of deductions you can take for home improvements, but they are not necessarily clearly spelled out. The IRS does not list them as actual home improvement deductions. Your home improvements should be made because they are needed or wanted and with the main goal of increasing the value of your home, not getting a tax deduction. You may end up finding out, once the work is done, that there are no deductions for which you qualify.

Eric Slarkowski’s long articles can be encountered on several online sites associated with make your own dovetail joint and dovetail jigs. You can come across his work on dovetail jig reviews over at http://www.insidewoodworking.com/jigs/dovetail_jigs.html and other sources for dovetail jig reviews knowledge.

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