June 2009

What's New in Taxes

Energy-saving home improvements could cut your 2009 taxes

6/1/2009 -

President Obama signed the "American Recovery and Reinvestment Act of 2009" into law on February 17, 2009. Among the various provisions in the law are new energy tax credits that can really add up to savings for the homeowner. Making energy-saving improvements to your home will help to save on utility bills, enhance your efforts to go "green," add value to the home, and perhaps reduce your tax bill for 2009. These residential energy tax credits fall into two main categories: energy efficiency improvements and renewable energy systems. In many cases, the "Recovery Act" adjusts or extends similar energy credits previously available.

* Energy efficiency
The "Recovery Act" adjusts the residential energy property credits previously allowed, increasing the tax credit to 30% and the maximum aggregate cap to $1,500. The credit applies to eligible property placed into service in your principal residence during 2009 and 2010. Qualifying improvements for this energy credit include insulation; exterior windows and doors; central air conditioning systems; water heaters and furnaces burning natural gas, propane, or oil; stoves using renewable biomass fuel such as wood, pellets, and plants; hot water boilers; electric heat pump water heaters; certain metal roofs; and advanced main air circulating fans.

Installation of these items as part of a newly constructed home does not qualify for the credit. For certain eligible items, the credit can be calculated based only on the cost of materials; for other items, the cost of installation also can be included. This credit is not subject to income phase-outs, and the credit is allowed under the alternative minimum tax.


* Renewable energy
The 2009 law also generally removes the tax credit dollar limits for renewable energy systems. Such property includes solar hot water heaters, geothermal heat pumps, and wind energy systems. The tax credit, available through 2016, is up to 30% of the cost, including both labor and materials. Primary residences, second homes, and rental units qualify for this credit; existing and newly constructed structures are eligible.

Now may be the right time to upgrade the energy efficiency of your home. To discuss the tax breaks available for the improvements you have in mind, give us a call. We can help you sort through the details.

 

For details or for assistance with your tax planning, give our office a call.