Nobody likes taxes. Well, almost nobody… there is this loopy bird who wants Obama to raise his taxes. But for the remaining 99.999% of us, lower taxes is a good thing.
How would you like to lower your taxes and improve your home at the same time?
In the past, both the State and National governments have put forth efforts to help the struggling housing market. Most famously, the first time home buyer’s tax credit gave some incentive for renters to become owners. Alas, those efforts have ceased. But never fear, opportunities still exist!
I spoke with Dan Small CPA, with Curry Drake & Associates about the potential tax-saving options still available. In my thinking, if a homeowner in Louisville is considering multiple home improvement projects there’s a benefit to knowing that certain projects bring a tax benefit while others do not.
Dan was quick to advise me, “I never counsel my clients to make a purchase decision based solely on the tax benefits. You need to consider all the factors involved.” It’s simply one more piece of data to include in the decision-making process.
So, if the other factors do align themselves with a particular project, I’ve outlined the Federal Tax Credits that are currently available for Louisville homeowners. Please note, some of these expire at the end of 2011 so you may have to act quickly.
Tax Credits That Expire on December 31, 2011
These require that it be an existing home and your principal residence. New construction and rentals do not qualify.
- Biomass Stoves: Tax Credit Amount: $300
Requirements: Thermal efficiency rating of at least 75%
- Heating, Air Conditioning: Advanced Main Air Circulating Fan: Tax Credit Amount: $50
An Advanced Main Air Circulating Fan is an efficient fan, or blower motor which blows the air that your furnace heats up through the duct system.
Requirements: Must use no more than 2% of the furnace’s total energy.
- Insulation: Tax Credit Amount: 10% of the cost, up to $500
Requirements: Typical bulk insulation products can qualify, such as batts, rolls, blow-in fibers, rigid boards, expanding spray, and pour-in-place.
- Roofs (Metal, Asphalt): Tax Credit Amount: 10% of the cost, up to $500
Requirements: “Metal roofs with appropriate pigmented coatings” and “asphalt roofs with appropriate cooling granules” that also meet ENERGY STAR requirements.
- Water Heaters (Non-solar): Tax Credit Amount: $300
Requirements: Energy Factor ≥ 0.82 OR a thermal efficiency of at least 90%.
- Windows & Doors: Tax Credit Amount: 10% of the cost, up to $500, but windows are capped at $200
Requirements: Must be ENERGY STAR qualified.
Tax Credits That Expire on December 31, 2016
Existing homes & new construction qualify. Both principal residences and second homes qualify. Rentals do not qualify.
- Geothermal Heat Pumps: Tax Credit: 30% of cost with no upper limit
Requirements: Closed Loop: EER ≥ 14.1, COP ≥ 3.3
Open Loop: EER ≥ 16.2, COP ≥ 3.6
Direct Expansion: EER ≥ 15, COP ≥ 3.5
Tax Credit includes installation costs.
- Small Wind Turbines (Residential): Tax Credit: 30% of cost with no upper limit
Requirements: Must have a nameplate capacity of no more than 100 kilowatts. Tax Credit includes installation costs.
- Solar Energy System: Tax Credit: 30% of cost with no upper limit
Requirements: At least half of the energy generated by the “qualifying property” must come from the sun. The system must be certified by the Solar Rating and Certification Corporation (SRCC) or a comparable entity endorsed by the government of the state in which the property is installed.
Note: The credit is not available for expenses for swimming pools or hot tubs. The water must be used in the dwelling. Photovoltaic systems must provide electricity for the residence and must meet applicable fire and electrical code requirements. Tax Credit includes installation costs.
Tax Credits That Expire on December 31, 2016
Existing homes & new construction qualify. Must be your principal residence. Rentals and second homes do not qualify.
- Fuel Cells: Credit Details: 30% of the cost, up to $500 per .5 kW of power capacity
Requirements: Efficiency of at least 30% and must have a capacity of at least 0.5 kW. Tax Credit includes installation costs.
For all the details and how to apply for the tax credits, please visit 2011 Federal Tax Credits for Consumer Energy Efficiency.
Update 9/29: Also see Kentucky: Incentives/Policies for Renewables & Efficiency for State incentives.
So there you have it! Considering a Louisville home improvement project? Don’t forget the tax ramifications. If you need an expert CPA for your personal taxes or those of your small business, I fully recommend Dan Small with Curry Drake & Associates.