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What is the credit?

The 2009 American Recovery and Reinvestment Act reinstated Federal tax credits for taxpayers        who make certain energy-efficient improvements to their homes.  This tax credit applies only to improvements made to a primary residence from January 1, 2009 through December 31, 2010.  Under section 25c of the Internal Revenue Code (I.R.C.), homeowners can receive a 30% credit on the costs up to $1,500, of “qualified energy efficiency improvements.”   The maximum total credit to be claimed over the two year period is $1,500, meaning if the full credit is used in 2009, there is no additional credit available in 2010.  Basically you can spend up to $5,000 during this 2 year period on one or more products, and get $1,500 (30% of $5,000 = $1,500) back as a tax credit.  Remember, this credit is only available for improvements to the taxpayers’ principal place of residence, and not for new home construction. 

What qualifies?

The energy-efficient improvements that qualify are windows, doors, insulation, roofs, HVAC, or non-solar water heaters.  For more information on qualified energy-efficient improvements visit the IRS’s website at www.IRS.gov or www.energystar.gov.   

What is a credit?

A tax credit is generally more valuable than an equivalent deduction because a tax credit reduces your tax dollar for dollar while a deduction only removes a percentage of the tax liability.

How to receive a credit?

Along with your 2009 Federal Income Tax Return, complete and attach IRS form 5695.    Maintain copies of the dealer invoice and the Manufacturer’s Certification Statement for your records.  A Manufacturer’s Certification Statement is a signed statement from the manufacturer certifying that the product or component qualifies for the tax credit.  In case of an IRS audit, these documents will need to be provided.

This blog entry is not intended to qualify as tax advice.  To determine if this stragety is appropriate for your individual situaion, please contact a qualified tax advisor.

What is the credit?

Only available for those vehicles purchased from February 17, 2009, through December 31, 2009, the 2009 American Recovery and Reinvestment Act permits taxpayers to take a deduction for state and local sales and excise taxes paid on the purchase of new qualifying vehicles up to the maximum purchase price of $49,500.  

What and who qualifies?

This incentive applies to new cars, light trucks, motor homes and motorcycles with a gross vehicle weight of 8,500 or less.  There is no limit to the number of vehicles purchased, as long as the total price of all vehicles used in the calculation does not exceed $49,500 and the taxpayer taking the deduction is the first owner.   In states that don’t have a sales tax, the law provides a deduction for other taxes or fees paid.

 The deduction is reduced for joint filers with modified adjusted gross incomes (MAGI) over $250,000 and completely phased out for those taxpayers with MAGI over $260,000.  For all other taxpayers, the deduction is phased out with MAGI between $125,000 and $135,000, respectively.

 How does it work?

The deduction is available to taxpayers that itemize along with taxpayers that claim a standard deduction.  For those claiming a standard deduction, Schedule L, a new form in 2009, must be completed and attached to the 2009 tax return.  For those that itemize, there is a separate worksheet new in 2009, that is required to be completed and attached to Schedule A of form 1040.  Go to www.irs.gov to get the forms.

 NOTE:  Those itemizers who elect to deduct state sales tax in lieu of state income taxes get no benefit from this change, since the auto sales tax is already included in the sales tax deduction.

This blog entry is not intended to qualify as tax advice.  To determine if this stragety is appropriate for your individual situaion, please contact a qualified tax advisor.