If you can't afford to sell your home and you've got money set aside for remodeling, there's good news for you, thanks to the feds.
The massive Recovery and Reinvestment Act signed by the president this month to help boost the economy contains tax credits that can benefit your 2009 or 2010 returns. There were credits for making energy-efficient upgrades to your home this year, but the new law increases their benefits and extends them into 2010. For instance:
- The tax credit has been bumped up to 30% from 10%.
- The $200 credit cap on new windows has been taken out. (Good thing, unless you're replacing one window that's a foot square in size.)
- The maximum credit you can receive for a year has gone up from $500 to $1,500. However, if you're making expensive improvements like adding a geothermal heat pump, a solar water heater or solar power cells, you can take a credit for a full 30% of the cost.
Some businesses are gearing up for work when the credits become more well-known. "I've had some calls from people after it became law, and I plan to use these tax credits in my advertising," says electrical contractor Rich Johnson of Los Angeles. "If you have the money for the project, now's the time to do it. It's not going to get any cheaper."
The credits work for people remodeling their homes, but the rules are different for those building new houses. Basically, for a new home, you're eligible for credits with projects that go above and beyond, such as solar cells or geothermal heat pumps, but not items that normally would have to be put into a new home, such as windows, insulation, etc.
Here are some costs of energy-saving projects where you could pick up the 30% credit:
Windows: Around $750 per window installed. (Double-check with the contractor to make sure the model you're buying qualifies for the tax credit.)
Roof: $5,000 to $20,000, depending on the materials for a 2,000-square-foot home. You only get the credit if you've installed an EnergyStar-rated asphalt or metal roof.
Insulation: $3,000 to $7,000, depending on the size of the home and the type of insulation used. (It has to meet 2009 standards.) Also, the primary purpose of the product needs to be insulation. You can't put new siding on your home, even though it may have insulating properties, and take the credit.
Air conditioner/furnace: About $4,000 and up for a central air system, depending on the size of your home. You need to meet specific energy-saving guidelines to get this credit.
Water heater: $700 to $1,500, depending on the model and your needs. To get the credit, the new heater has to say somewhere in its documentation that it has "an energy factor of 0.82 or a thermal efficiency of at least 90%."
Solar electricity panels: $25,000 to $75,000, based on your roof size and how many watts you need. An expensive upgrade, but remember this is one that qualifies for a "super" credit. Put a $50,000 solar system on the roof this year, and you'll qualify for a credit of $15,000 on next year's tax return.
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