List Categories | List All Articles | List Articles By Title
New Tax Breaks for Energy Efficient Home Improvements
If you would like to make your existing home more energy efficient and get some help paying for the improvements, you need to know about the Energy Tax Incentives Act of 2005. The new law provides a $500 lifetime credit against your federal income tax for the cost of certain energy-saving home improvements that you make to your home after December 31, 2005 and before January 1, 2008. Up to $200 of the tax credit may be applied to windows.
As you may know, a tax credit is far more favorable than a deduction of the same amount. Deductions only reduce the amount of income that is subject to tax. A tax credit, on the other hand, is a dollar for dollar reduction of the tax due when you file your income tax return. So, if you are in the 28% income tax bracket, the new $500 credit is equivalent to a tax deduction of nearly $1800!
Here are highlights of the new provisions:
There is an overall lifetime cap on the credit of $500, and a maximum of $200 of the credit may be applied to qualified window expenditures. Subject to those limitations, you may receive a credit for the sum of the following:
Building Envelope Components. Ten (10%) percent of your expenditures for so called "building envelope components" will qualify for the tax credit. Building envelope components include the following:
To qualify for the credit, the building envelope components must be installed in or on a dwelling unit (including a manufactured home) located in the United States that is owned by you and used by you as your principal residence. Installation of envelope components in a second or vacation home or rental property therefore will not qualify for the new tax break.
Only new components are eligible for the credit and the components must reasonably be expected to remain in use for at least 5 years.
Energy efficient property expenditures. Amounts paid for "residential energy property expenditures" will also qualify for the credit up to the following specific limits:
Expenditures for labor costs for onsite preparation, assembly or original installation may be included. Improvements must be installed in or in connection with a dwelling unit located in the United States that is owned by you and used by you as your principal residence.
There are energy efficiency standards described in the new law that your home improvements must meet, so some investigation on your part will be necessary to be sure that the improvements will qualify for the credit. For this reason, if you hire a third party to do the work, your written agreement with the contractor should include the contractor's guaranty that the installed property will meet the energy efficiency standards of the new law.
There is one potential trade-off, if you use the credit. Many improvements to your home will increase your "tax basis" in the property, and this increased tax basis may, in turn, reduce the amount of capital gain that is realized if you sell your home at a profit. The increase in tax basis that would otherwise result from energy efficient improvements that qualify for the credit will be reduced by the amount of the allowed credit. Since the tax credit decreases your tax basis, you are likely to have more capital gain at the time of sale. This will not affect you if all of the capital gain realized at the time of sale is protected by the $250,000 exclusion ($500,000 for married couples) for gains realized on the sale of your principal residence. But even if there is an increase in the taxable capital gain realized when you sell your home, it will almost certainly be outweighed by the advantage of using the new income tax credit currently.
Like so much of the Internal Revenue Code, the new provisions encouraging energy efficient home improvements seem unnecessarily complicated, but we have to consider the source - Congress! However, a bit of patience and careful planning will bring you some very real tax savings and help the environment to boot!
John Pollock is an attorney practising in Detroit, Michigan and the webmaster of http://www.forms-free-4-all.com
How To Choose The Right Home Water Filters and Water Purifiers For Your Needs
When it comes to home water filters and water purifiers, consumers have many choices. You can choose from leading name brands such as Brita, Culligan, PUR, and Braun.
Motion Detector Technology
Motion detectors are in use all around us in both residential and commercial locations. There are many common uses for motion detectors that most people find convenient and helpful in very common, everyday situations, and there will be some new and innovative uses that we may see more and more of in the future.
Replacement or Retrofit Style Frame? Which is Right for You?
Last week I told you how to measure for your vinyl replacement windows when replacing aluminum windows. Now that you're ready to order your new vinyl replacement windows, we need to talk about the different frame style options available.
11 Tips for Stripping Wallpaper: How to Get Rid of Ugly Wallpaper!
I broke my promise to myself and stripped wallpaper again. The only reason I did this is for $100,000 profit.
Marketing For The Home Builder
When one is looking into marketing for the home builder, one should find a number of tools to promote newly built homes and home-building offers:Advertising: the marketing for the home builder package should offer an advertising agency.Your primary goal, to draw leads, should be catered to with such services and offerings as a marketing plan, an established venue (or venues), listings and listings links, link-backs, artistic renderings (drawings and/or photos), all to create web presence by name branding, the latest in internet sales generating techniques.
If You Want to Bring Your Bathroom Up to Date, Consider Fitting a Shower Stall
Modern shower stalls look sleek and stylish. If you have the space, adding a shower stall in addition to your bathtub can be a great way to improve your bathroom.
5 Questions To Ask Before Starting Any Home Improvement Project
1. What experience does your contractor have with this type of project?How much experience does the home improvement contractor have in doing projects like yours? Does s/he specialize in this type of project, or will s/he be using your home as a learning project? Typically, contractors who have done several projects like yours will have a better idea of the actual costs and production issues involved in your project.
Is a Hot Tub for You? Top 5 Questions You Need to Answer
As a way of relaxing, more and more people are adding a hot tub to their home. Not only are hot tubs relaxing but they also offer tremendous benefit for people of all ages.
Home Remodeling Business
Need for home remodelingThe need for home remodeling is on the rise as many people like the neighborhood they live in and the affordability of their existing homes. By incurring a little cost they can remodel their old houses to increase space and add new amenities.
How to Install a Ceiling Fan - A Simple Guide
A Complete manual on how to install a Ceiling Fan may take more than just an article; it may all even take up an entire booklet. Let me just give you a simple, no-nonsense essential guide in installing a ceiling fan.
Bakers Racks Add Flair And Style To Your Kitchen
Many items a person can add to the kitchen are stylish and functional. Bakers racks fit this description nicely.
Here Comes The Sun: Solar Energy is Becoming More Attractive for Mainstream Consumers
The price of a barrel of oil has never been higher ($62.00+ in summer 2005 even before the chaos caused by Katrina).
Sofa slipcovers - Give your home an instant makeover!
Sofa slipcovers are designed to be easy to fit over your existing upholstery, to give your furniture a fresh new look and protect the fabric underneath. If your favorite sofa is looking a bit tired or outdated, but is generally in good condition, you could give it a new lease of life simply by adding some stylish sofa covers.
Swim Spas Make a Big Splash with Baby Boomers
If you are an aging baby boomer like I am, you may be looking for a fun form of water recreation where you can get some relief from aching muscles and joints, be able to exercise or just relax, have a place for the grand kids to play and better yet, all of this occurs in one place from the comfort and convenience of your own home.Many of the potential swimming pool buyers are looking into swim spas as an alternative to installing a fiberglass swimming pool or above ground pool.
Electrical Home Inspection: What You Need to Know!
Whether you're buying a home, or just moving in to your new home, here is some advice that can help you. If you're in the buying process the things you will be looking for are safety and repair aspects.
Remodeling Your Home: How Much Is Too Much?
The classic way for homeowners to increase the value of their house is by remodeling existing rooms or adding on to its current plan.Some choose to build recreation rooms and studies while others add new appliances, fixtures and cabinets to enliven rooms and make their home more attractive to future buyers.
Use the FHA Mortgage Specifically Created for Home Improvement
Almost everyone knows about FHA mortgages. They are tailor-made for first time homebuyers and others with less than perfect credit or other financial issues.
Log Home Mistakes Ebook Review
Ok, you are ready to build a log home. If you are not going to build it yourself, it mean you will hire a builder.
Prefabricated Home Packages
This is by no means an exhaustive list of what's available in the area of prefabricated homes and buildings. This article is to introduce you to the world prefab.
"5 Fast Ideas to Freshen the Look of your Room
"Company's coming and my place doesn't look right?"You know how it goes, you have visitors coming tonight. You've cleaned every room in the house (well, maybe not the bedroom).
home | site map
All articles are copyright to their owners.
Note: this website lists articles, We do not Write Articles !