Take Some Credit for Your Home Improvements

Looking for reasons beyond energy conservation and lower utility bills to make your home more efficient? In June 2005, Congress passed the Energy Policy Act as part of its energy bill, which offered federal tax credits (deductions affect your taxable income, tax credits reduce the tax itself) for energy efficiency in both the residential and commercial sectors. This was really good news for homeowners. Unfortunately, the act expired at the end of 2007 and has yet to be renewed by Congress.

If you made home improvements before December 31, 2007, you will still be able to claim them on this year's taxes. But for next year's, the situation isn't yet settled. An extension of the Energy Policy Act passed in the House in February; however, a new bill that would increase the tax credits for energy efficiency has been introduced to the House and Senate but has yet to be voted on.

Home Improvement
Homeowners may claim up to $500 for insulation, replacement windows, water heaters, and specific heating and cooling systems installed in 2007, but not yet for improvements made in 2008 (see the Energy Star website). Since these improvement credits may be reinstated (and will provide you energy savings anyways), here is a rundown with standards they must meet in parentheses:

*2004 International Energy Conservation Code
**Annual Fuel Utilization Efficiency

New Construction
Building a new home? Solar power can still give you a tax credit up to $2,000 (IRS form 5695). If your home is built by an eligible contractor (one who has completed IRS form 8908 and has followed the statutory energy requirements) and it passes inspection by a home energy rater, you are eligible for a $2000 tax credit as well. Certified raters are listed at the website of the Residential Energy Services Network (RESNET), a third-party, standards-making organization recognized by the IRS, Environmental Protection Agency and the Department of Energy (www.resnet.us/directory/raters.aspx).

Hybrid Cars
New fuel-efficient hybrid vehicles earn you tax credits as well. The amount is determined by a set of criteria followed by the IRS and ranges from $250 to $3150. The IRS provides credit amount by model on its website (www.irs.gov/newsroom/article/0,,id=157557,00.html).

So while April 15 isn't exactly a holiday, you may still get a substantial gift back from Uncle Sam by claiming what's owed to you.