The American Recovery and Reinvestment Act of 2009’s tax related provisions are well documented successes. By some estimates, one-third of recent home sales can be attributed to the $8000 tax credit for first-time homebuyers, and the cash for clunkers was also very popular.  If you plan on taking advantage of the credit, you should have an offer in by the end of this week.  There are 11 weeks left for the credit, and according to The National Association of Realtors, first-time homebuyers take an average of 12 weeks to search for a home.

You may not realize that The Act also extended many consumer tax incentives for energy efficient building products originally introduced in 2005. Qualifying products purchased between January 1, 2009 and December 31, 2010 are eligible for a tax credit equal to 30 % of the product cost. Installation is not included so be sure to obtain an itemized invoice from your retailer or installer.

Here is a summary of some of the energy related tax credits available:

• Home Energy Efficiency Improvement Tax Credits
  Consumers who purchase and install specific products, such as energy-efficient windows, insulation, doors, roofs, and heating and cooling equipment in existing homes can receive a tax credit for 30% of the cost, up to $1,500, for improvements “placed in service” starting January 1, 2009, through December 31, 2010.
• Residential Renewable Energy Tax Credits
  Consumers who install solar energy systems (including solar water heating and solar electric systems), small wind systems, geothermal heat pumps, and residential fuel cell and microturbine systems can receive a 30% tax credit for systems placed in service before December 31, 2016; the previous tax credit cap no longer applies.
• Automobile Tax Credits
  Hybrid Gas-Electric and Alternative Fuel Vehicles
  Individuals and businesses who buy or lease a new hybrid gas-electric car or truck are eligible for an income tax credit for vehicles “placed in service” starting January 1, 2006, and purchased on or before December 31, 2010. The amount of the credit depends on the fuel economy, the weight of the vehicle, and whether the tax credit has been or is being phased out once that company has sold 60,000 eligible vehicles. Hybrid vehicles that use less gasoline than the average vehicle of similar weight and that meet an emissions standard qualify for the credit.

This Week’s Real Estate Insight:

The maximum amount of homeowner credit for all improvements combined (including roofing, insulation, HVAC, and water heaters) is $1,500 during 2009 and 2010. The IRS will determine final tax credit amounts. Check out ENERGYSTAR.gov and IRS.gov for guidelines.

There are countless advantages to owning a home, especially the tax deductions, so every year I like to sit down with Patricia Thompson, my go-to tax guru. Pat is the tax partner at Piccerelli, Gilstein & Company, LLP, and is one of the foremost tax experts in Rhode Island.  

 In preparation for the show, Pat created a comprehensive outline for deductions and strategies for home owners and real estate investors that I would be happy to email to you if you request it, but here is a brief overview of some of deductions homeowners can take:

• Mortgage interest, both first and second
• Real Estate Taxes
• Loan Points Paid on a Purchase
• Certain Closing costs
• PMI, mortgage insurance premiums.
• Moving expenses
• Energy tax credits
• First time homebuyer credit
• Selling the residence: Gain on sale of residence excluded up to $250,000 ($500,000 certain married individuals)

This Week’s Real Estate Insight:

The tax code is so complicated and changes so frequently that I would advise you to consult your own tax advisor to make sure you maximize the return on your investment.  

 

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