(Almost ex-)President Bush has signed into law new consumer tax credits for energy efficiency home improvements, as well as purchases of plug-in hybrid vehicles. These provisions were included in H.R. 1424, the Emergency Economic Stabilization Act of 2008, which the president signed on October 3, 2008. The homeowner tax credits are largely the same -- but not identical -- to those that expired at the end of 2007, and begin again on January 1, 2009. Taxpayers who claimed some but not all of the $500 federal income tax credit for energy efficiency home improvements that was in effect in tax years 2006 and 2007 may utilize the unused portion in 2009, the IRS has informed the Alliance to Save Energy.
What is a tax credit?
You don't receive an income tax credit when you buy the product, like an instant rebate. You claim the credit on your federal income tax form at the end of the year. The credit then increases the tax refund you receive or decreases the amount you have to pay.
What is the difference between a tax credit and a tax deduction?
In general, a tax credit is more valuable than a similar tax deduction. A tax credit reduces the tax you pay, dollar-for-dollar. Tax deductions - such as those for home mortgages and charitable giving - lower your taxable income. If you are in the highest 35-percent tax bracket, the income tax you pay is reduced by 35 percent of the value of a tax deduction. But a tax credit reduces your federal income tax by 100 percent of the amount of the credit.
You can get a one-time income tax credit of up to $500 in total for installing efficient new windows, insulation, doors, roofs, and heating and cooling equipment in your home.
What energy-efficient home improvements are eligible?
The overall $500 cap can be reached in several ways with the purchase and installation of energy-efficient products:
Exterior windows: 10 percent of the total cost, up to $200. Includes skylights and storm windows.
Insulation, exterior doors, or roofs: 10 percent of the cost of the product (but not the installation), up to $500. Includes seals to limit air infiltration, such as caulk, weather stripping, and foam sealants, as well as storm doors.
Central air conditioner, heat pump, water heater, or bio gas (e.g. corn) stove: up to $300 towards the full purchase price, including installation costs. Starting in 2009, geothermal heat pumps are instead eligible for a separate tax credit for 30 percent of the cost up to a maximum credit of $2,000.
Furnace or boiler: up to $150 towards the full purchase price, and/or $50 for an efficient air-circulating fan in a furnace, including installation cost.
In addition, to be eligible for the federal tax credits:
Windows, doors, and insulation must meet the requirements for your region of the 2001 or 2004 International Energy Conservation Code, a model energy code for buildings. All ENERGY STAR windows qualify.
Roofs must be metal with pigmented coatings or asphalt with cooling granules that meet ENERGY STAR requirements.
Heating and cooling equipment must meet stringent efficiency requirements - not even all ENERGY STAR products will qualify.
Also, windows, doors, insulation, and roofs must be expected to last at least five years (a two-year warranty is sufficient to demonstrate this). Manufacturers can certify (in packaging or on the company's web site) which of their products qualify for the tax credit. All the improvements must be installed in or on the taxpayer's principal residence in the United States. Condo and co-op improvements are apportioned to the owners. The credit cannot be taken against the Alternative Minimum Tax (AMT).
When are they available?
The home improvement tax credits apply for improvements "placed in service" from January 1, 2009, through December 31, 2009. They are not available in 2008, but mostly were available in 2006 and 2007. The IRS defines "placed in service" as when the products or materials are ready and available for use - this would generally refer to the installation, not the purchase.
What do I need to do to get the tax credit?
You will need to file IRS Form 5695 with your taxes. In addition, you will need to keep at least receipts proving that you purchased the improvements and a copy of the manufacturer's certification (or the ENERGY STAR label for windows).
Ask your accountant or tax advisor for further guidance.
Showing posts with label Bucks County. Show all posts
Showing posts with label Bucks County. Show all posts
Tuesday, December 9, 2008
Wednesday, October 29, 2008
First Time Buyer Tax Credit
Well, we have to do something to motivate buyers in this market. I think people know on some level that it makes sense to buy now, but it seems that buyers are paralyzed with fear and uncertainty. One of the best reasons to buy a house now is the $7,500 home ownership tax credit that the federal government created earlier this year as part of the Housing and Economic Recovery Act (H.R. 3221). Here's how it works:
1. Buyers have until July 2009 to make a purchase that qualifies.
The tax credit was passed in July of this year as part of the Housing and Economic Recovery Act (H.R. 3221). It’s worth up to $7,500 and can be taken in a single tax year. Authorization for the credit ends July 1, 2009, so if your customers wait to buy in the first half of 2009 they can take the credit on their 2009 tax return. Taxpayers can take the credit on their 2008 tax return if they bought their house this year after April 9.
2. Buyers don't really have to be "first-timers."
The tax credit is actually available to any individual or household that hasn’t owned a home for at least three years. And the NATIONAL ASSOCIATION OF REALTORS® has asked Congress to expand the credit to all buyers, not just those who haven't owned a primary residence in recent years.
3. Even if buyers exceed the income limit, they can benefit from the credit.
The actual credit amount is set as a percentage of the home purchase amount. That percentage amount is 10 percent, so your customers can get 10 percent of the home price credited against their tax liability, up to a maximum $7,500. Sounds like a great deal. But what if your clients make more money than the income limit of $75,000 for individuals and $150,000 for households? Good news: Individuals whose income exceeds the $75,000 limit but don't make more than $95,000 can still take the credit but on a reduced basis. The same thing applies to households earning up to $170,000. By the way, any house is eligible as long as it’s a primary residence and is in the United States.
4. Think of it as an interest-free loan.
The federal government requires the tax credit to be paid back in small, 6.67-percent increments over 15 years, although repayment will be no more than $500 yearly and payments will not start until 2011. For that reason, some analysts have likened the credit to a 15-year, interest-free loan to help make home buying affordable. NAR is pushing congress to remove the repayment provision, making this tax credit a true tax credit rather than an interest-free loan.
5. You don't have to be authorized before making a home purchase.
There is no pre-purchase authorization, application, or other approval process. Eligible buyers simply have to claim the credit on their IRS Form 1040 tax return and/or any form that the IRS might devise.
6. New-home construction qualifies.
For a home that a buyer constructs, the purchase date is the first date the buyer occupies the home.However, any home that is not a primary residence, such as a vacation home or income property, does not qualify.
So, what are you waiting for? Don't wait until June to start looking. Some of the best deals can be had in the winter months. Give me a call and let's get the ball rolling!
1. Buyers have until July 2009 to make a purchase that qualifies.
The tax credit was passed in July of this year as part of the Housing and Economic Recovery Act (H.R. 3221). It’s worth up to $7,500 and can be taken in a single tax year. Authorization for the credit ends July 1, 2009, so if your customers wait to buy in the first half of 2009 they can take the credit on their 2009 tax return. Taxpayers can take the credit on their 2008 tax return if they bought their house this year after April 9.
2. Buyers don't really have to be "first-timers."
The tax credit is actually available to any individual or household that hasn’t owned a home for at least three years. And the NATIONAL ASSOCIATION OF REALTORS® has asked Congress to expand the credit to all buyers, not just those who haven't owned a primary residence in recent years.
3. Even if buyers exceed the income limit, they can benefit from the credit.
The actual credit amount is set as a percentage of the home purchase amount. That percentage amount is 10 percent, so your customers can get 10 percent of the home price credited against their tax liability, up to a maximum $7,500. Sounds like a great deal. But what if your clients make more money than the income limit of $75,000 for individuals and $150,000 for households? Good news: Individuals whose income exceeds the $75,000 limit but don't make more than $95,000 can still take the credit but on a reduced basis. The same thing applies to households earning up to $170,000. By the way, any house is eligible as long as it’s a primary residence and is in the United States.
4. Think of it as an interest-free loan.
The federal government requires the tax credit to be paid back in small, 6.67-percent increments over 15 years, although repayment will be no more than $500 yearly and payments will not start until 2011. For that reason, some analysts have likened the credit to a 15-year, interest-free loan to help make home buying affordable. NAR is pushing congress to remove the repayment provision, making this tax credit a true tax credit rather than an interest-free loan.
5. You don't have to be authorized before making a home purchase.
There is no pre-purchase authorization, application, or other approval process. Eligible buyers simply have to claim the credit on their IRS Form 1040 tax return and/or any form that the IRS might devise.
6. New-home construction qualifies.
For a home that a buyer constructs, the purchase date is the first date the buyer occupies the home.However, any home that is not a primary residence, such as a vacation home or income property, does not qualify.
So, what are you waiting for? Don't wait until June to start looking. Some of the best deals can be had in the winter months. Give me a call and let's get the ball rolling!
Tuesday, October 14, 2008
Welcome
OK, I've resisted blogging long enough. I'm told that blogging about real estate is good for business. I know, I know...but what to blog about? The state of the local real estate market? Information on local communities? My listings? My personal life? Well, how about all of the above?
Please check back often for a potpourri of real estate-related news. If you have anything that you'd like to contribute you can email me at Julie.Snyder@LNF.com. I'd be happy to post your community news.
Happy reading!
Please check back often for a potpourri of real estate-related news. If you have anything that you'd like to contribute you can email me at Julie.Snyder@LNF.com. I'd be happy to post your community news.
Happy reading!
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