Still Taking Tax Breaks for Fixing Your Home

Some of the government incentives from the financial crisis have expired, but the tax breaks for making your home more energy-efficient are available through the end of 2010 and apply to energy- efficient improvements you made in 2009. We know more about the breaks than when the law first was enacted, but you still have to be careful the deal is worth while.

The difficulty when the tax breaks first were enacted was determining which improvements met the energy efficiency standards to qualify for the credits. The IRS issued regulations detailing the standards, and the bottom line is as a consumer you are allowed to take the credit for any product the seller certifies is eligible for it.

The credit is 30% of the first $5,000 you spend on qualified home improvements. You take a maximum credit of $1,500 for the two years, not for each year or for each item you purchase. You can take all the credit in one year or spread it over two years, depending on when your purchases were. Credits are available only for items installed in your principal residence.

Some energy efficient expenditures are not subject to the $1,500 limit. These are geothermal heat pumps, solar water heaters, solar panels, fuel cells, and wind power systems. For these you take a credit for 30% of the cost without limit.

There are a range of tax-credit-eligible items you are likely to consider:

– Exterior windows & doors and skylights

– Storm windows & doors

– Metal roofs and asphalt roofs

– Insulation

– Central air conditioning

– Air source heat pumps

– Water heaters (electric heat pump)

– Biomass stoves

– You may also find window shades that qualify for the credit.

Make sure the credit is worth while. Many of the qualifying items cost more than standard items. You have to compare the additional estimated monthly savings from the item plus the credit to the premium price you pay for it. You also have to estimate how long it will take for the pay off.

The federal government also has a small rebate program for purchases of energy-efficient appliances, such as refrigerators. These rebates are in addition to any offered by the manufacturer and retailer. Each state has an allotted amount of rebates. When the money is used up, there are no more rebates. For details go to the U.S. Department of Energy web site at www.energy.gov and click on the “Rebates for Energy Star Appliances” box.

Don’t forget your state likely has tax breaks of its own that can be added to the federal write offs, and many utilities offer some kind of program.

May 2010. RW