It seems that every salesman in their respective industry is willing to tell a homeowner what they want to hear — there is a tax credit that will pay for your new home improvement.
Unfortunately it’s not always true. Tax credits and tax deductions vary from year to year (if they exist at all for that year). In 2009 and 2010 homeowners rushed to purchase new windows with what was the best tax break ever. Many slick salesmen told people, even in the final days of 2010, that they would qualify for up the maximum of $1500 even if they bought their windows on December 31st. Unfortunately that was not true, and as of the time of this article, many people who have not yet filed their taxes and who may not even have their windows installed yet, think they qualify when they do not. Simply put, if a homeowner did not have their windows installed before January 1st, 2011, they are committing fraud if they take the 2010 tax credit.
If you were lucky enough to get your home improvements completed prior to the end of 2010 you can find the IRS tax credit form 5695 online by clicking here.
So where can you find all of the information for all of the home improvements out there? There is one website, the Database of State Incentives for Renewables and Efficiency (DSIRE), which will help you figure out if there are any special incentives in your state. It is an interactive website which allows you to first click on your state, and then see all of the benefits which are available. Keep in mind that you will not qualify for all incentives. Some are only for non-profit companies and agencies, some help businesses, some are for governmental entities and some will even help homeowners. The benefits range from an exemption from state sales tax to cash back for qualifying improvements.
As an example, the following improvements allow for a full state sales tax exemption for 2011 in Wisconsin: Solar Water Heat, Solar Space Heat, Solar Thermal Process Heat, Photovoltaics, Landfill Gas, Wind, Biomass, Solar Pool Heating, Anaerobic Digestion. This does not help customers looking for windows.
The Federal Tax credit, which DSIRE also outlines, does cover windows, doors and roofing. The benefits are as follows:
For purchases made in 2011: Aggregate amount of credit is limited to $500. Taxpayer is ineligible for this tax credit if this credit has already been claimed by the taxpayer in an amount of $500 in any previous year.
Keep in mind, that these amounts will not help for homeowners who took more than $500 in any year all the way back to 2006. Here’s the exact wording from DSIRE.
This tax credit was amended and extended through December 31, 2011 by the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010. On January 1, 2011 several characteristics of this credit changed from their 2010 form. Most significantly, the cap was reduced from $1,500 to $500. The cap is on the total amount of credits a homeowner may claim between 2006 and 2011, not just for 2011. If a homeowner has already claimed $500 or more in credit through this allowance, they will be unable to claim new credits for improvements made during 2011.
To confuse you even more, the federal government has put strict limitations on what can be claimed. The law states that you will receive 10% of the cost of your qualifying home improvements up to $500. However, only $200 of that amount can be used for windows in 2011.
In 2011, many homeowners will be faced with sales representatives, whether they are in home sales or in store sales, who will tell homeowners what they want to hear. The savvy homeowner who has done their research (you wouldn’t be reading this article if you didn’t want to be informed) will recognize this as a red flag. This is not to say that the sales rep is being dishonest — more likely than not they either have not been properly trained or the owner of the company they represent is focused more on his bottom line than yours. Still, poor training is not an excuse.
These tactics are not uncommon.
In fact, in 2010, shortly after the federal lead safe requirements kicked in for homes built prior to 1978, I visited a Lowe’s Home Improvement store and was told by a department manager in their window department that lead safe renovating was not required if the windows were purchased prior to April 22nd. He also told me there was no additional cost that would be incurred for lead safe renovating for windows purchased after April 22nd. As a trained and certified lead safe renovator I knew this was untrue and in mid-summer I witnessed a Lowe’s subcontractor installing windows in a home built in the 1950’s.
In 2009 I was informed by a Menards rep that any windows with the Energy Star label qualified for the tax credit. This also, was untrue.
The key here is to arm yourself with good information. Explore requirements for each tax credit. Find out about u-factors (also known as u-values), know what dates any of these incentives cover, and make an informed choice.