Tax Credit Consulting: Home Improvements Portales NM
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Tax Credit Consulting: Home Improvements
Home Improvements Tax Credits
A new law passed in 2005 allows tax credits for home improvements that result in a savings in energy usage.
Home Improvements Tax Credits
The Energy Policy Act of 2005 (EPACT) allows tax credits for various items that are environmentally sound and reduce the energy usage in the home. Although certain deductions have existed for home improvements, a tax credit is usually more valuable than a tax deduction. The credit is taken directly from the amount of tax owed while the deduction only reduces the taxable income and so will only be a savings of a certain percentage. The percentage will be determined by the individual tax rate.
The Energy Policy Act allows credits for a variety of environmentally sound items. Fuel efficient vehicles and home appliances are also covered by the law. The reduced fuel costs and lower energy bills already benefit the consumer, but the idea is that they also benefit the entire society by reducing emissions and air pollutions. There are also concerns over energy shortages in the future.
Beginning with the 2006 tax year, taxpayers who install energy efficient improvements to their home such as insulation, windows, or heating and cooling equipment can receive a tax credit up to $500. The program remains in effect through the 2007 tax year as well. Purchases can be itemized directly on the tax form. This law also introduces several tax credits and deductions available to Business owners. These credits and deductions cover fuel efficient vehicles and certain improvements to buildings.
The law also allows a credit of 30% of the expenditures, up to a maximum of $2000, for photovoltaic or solar heating equipment. This heating equipment must provide heating for something other than swimming pools and hot tubs. It is also necessary for either of these Home Improvement Tax Credits under the Energy Policy Act that the improvements are made to the taxpayer's principle place of residence.
Although Tax ...