How to Invest in Your House and Make the Government Pay For (Part Of) It
You may have heard that one of the emphases of the President and Congress is to make the US "greener".
One way they are doing this is by giving Americans a Tax Credit for making their homes more energy efficient.
There are two potential tax credits: The Non Business Energy Property Credit and the Residential Energy Efficient Property Credit (REEP).
This article explains the first credit, because it is available to more Americans.
This credit was available in 2009, but if you didn't take advantage of it in 2009, it is still available in 2010.
A brief aside: a tax credit is generally considered more valuable than a tax deduction because a credit lowers your tax bill dollar for dollar.
So if you generate a tax credit of $1500, you will lower your tax bill by $1500.
I personally believe this is a great way to invest in your house, by generating long term energy savings, and make the government pay for part of it.
Non Business Energy Property Credit This is a Tax Credit allowed for people who make energy efficiency investments in their homes.
This is a non refundable Tax Credit allowed (30% of the qualifying improvement up to a maximum credit of $1500) for the purchase of qualifying property.
$1500 is the maximum amount allowed for 2009 and 2010.
To take advantage of the credit for your 2010 taxes, the qualifying property must be placed in service in 2010.
This means that you have a little over six months to take advantage of this for your 2010 taxes.
Qualifying Property In general the Qualifying Property includes:
energystar.
gov better describes the types of qualifying property you must install for the credit.
What this means is that you still have about six months to:
The instructions will tell you there are special considerations if you live in a condo or joint housing.
The house must be your main home and it must be in the US.
When you get the tax credit, you must reduce the basis in your home by that credit amount.
If you like the idea of generating tax savings by making your home more energy efficient, visit www.
irs.
gov for more info on this tax credit.
Here are a few considerations: First: If this credit interests you, you should Do it Soon.
If you wait until around Christmas, you may not have the money to take advantage of the credit.
In addition, during the summer, there are great deals on furnaces and insulation.
Second: Keep all your receipts.
Your tax preparer will need to review them, and you'll need them if your return is ever audited by the IRS.
Third: Do not forget to adjust the basis in your house after you sell it.
For most people, the basis reduction in the house will not affect you when you sell, and even if it does, the tax impact will be minimal.
Nevertheless, this must be accurate.
I realize that in this economy, it may be financially difficult to make this investment.
However, if you are thinking about the long term and if you have some extra money, why not invest it in your house, and let the government reimburse you for some of it by lowering your tax bill?
One way they are doing this is by giving Americans a Tax Credit for making their homes more energy efficient.
There are two potential tax credits: The Non Business Energy Property Credit and the Residential Energy Efficient Property Credit (REEP).
This article explains the first credit, because it is available to more Americans.
This credit was available in 2009, but if you didn't take advantage of it in 2009, it is still available in 2010.
A brief aside: a tax credit is generally considered more valuable than a tax deduction because a credit lowers your tax bill dollar for dollar.
So if you generate a tax credit of $1500, you will lower your tax bill by $1500.
I personally believe this is a great way to invest in your house, by generating long term energy savings, and make the government pay for part of it.
Non Business Energy Property Credit This is a Tax Credit allowed for people who make energy efficiency investments in their homes.
This is a non refundable Tax Credit allowed (30% of the qualifying improvement up to a maximum credit of $1500) for the purchase of qualifying property.
$1500 is the maximum amount allowed for 2009 and 2010.
To take advantage of the credit for your 2010 taxes, the qualifying property must be placed in service in 2010.
This means that you have a little over six months to take advantage of this for your 2010 taxes.
Qualifying Property In general the Qualifying Property includes:
- Biomass stoves
- Heating/Ventilation/Air Conditioning Equipment
- Insulation
- Non Solar Water heaters
- Windows, Doors, and Roofs
energystar.
gov better describes the types of qualifying property you must install for the credit.
What this means is that you still have about six months to:
- Buy and install insulation in your attic or crawlspace
- Buy and install an new energy efficient hot water heater
- Buy and install energy efficient doors
- Buy and install an energy efficient furnace (if your old one is ready to die)
The instructions will tell you there are special considerations if you live in a condo or joint housing.
The house must be your main home and it must be in the US.
When you get the tax credit, you must reduce the basis in your home by that credit amount.
If you like the idea of generating tax savings by making your home more energy efficient, visit www.
irs.
gov for more info on this tax credit.
Here are a few considerations: First: If this credit interests you, you should Do it Soon.
If you wait until around Christmas, you may not have the money to take advantage of the credit.
In addition, during the summer, there are great deals on furnaces and insulation.
Second: Keep all your receipts.
Your tax preparer will need to review them, and you'll need them if your return is ever audited by the IRS.
Third: Do not forget to adjust the basis in your house after you sell it.
For most people, the basis reduction in the house will not affect you when you sell, and even if it does, the tax impact will be minimal.
Nevertheless, this must be accurate.
I realize that in this economy, it may be financially difficult to make this investment.
However, if you are thinking about the long term and if you have some extra money, why not invest it in your house, and let the government reimburse you for some of it by lowering your tax bill?
