With so much attention being given to the new first time home buyer tax credit, some potentially lucrative tax incentives for home improvements have been overlooked. There are some new tax incentives as well as some expansions given to the current tax credits for home improvements relating to energy efficiency and renewable energy additions like solar panels. Now I am NOT an accountant or tax professional. When it comes to your taxes, I recommend you seek the advice of an accredited tax professional. Hopefully the IRS will issue some firm guidelines on the details of these credits soon as there are bound to be a lot of questions regarding qualification.
Here are the new tax credits in a nutshell. There is a tax credit of up to $1,500 for installing qualifying windows, doors, water heaters, roofs, insulation, heating and cooling equipment (HVAC, qualifying wood and pellet stoves) to your home in 2009 and 2010. On the renewable energy side, the tax credit is 30% of the qualifying solar technology, geothermal and wind energy systems with no limit through 2016. So if you install some solar panels and a wind power generator, you will receive a 30% tax credit which lowers your tax bill dollar for dollar for the cost of the upgrade.
Notably the big increase is in the energy-efficiency tax credit, which went from 10% of the qualifying costs to 30% and the cap also goes up from $500 originally to $1,500 (that’s a total credit for all applicable improvements combined in 2009 and 2010). The credit also includes stoves that use renewable biomass fuel. Another big change with the 30% renewable energy credit is the removal of the cap on claims for systems (except for fuel cells) installed after 2008.
Under the prior guidelines the cap was $2,000 for a solar system. Now you can take 30% of the qualifying cost instead.
If you live in an older home, these tax credits are targeted at you. Just replacing your older single pane windows with new dual pane, low e vinyl replacements will have a significant impact on your utility bills. Not only will you save money, but living in your home will be more comfortable year round. Before making any decisions, I recommend you consult with your tax professional to maximize your tax benefits. Check out the web for more information about renewable energy sources and the differences between them.
Source: Wall Street Journal
Related: First Time Home Buyer Tax Credit