Within weeks after the stimulus legislation took effect, reports began circulating of homeowners believing, mistakenly, that certain products and services were eligible for the tax credits. Such widespread confusion has been tracked back, in some cases, to misleading, unclear, or flat-out misrepresented advertisements and marketing messages from installers and manufacturers.
And it can put remodeling contractors in the uncomfortable if not money-losing position of needing to put projects on hold while trying to sort out the truth, or being the bearer of the bad news that those windows or labor costs, for instance, are not in face eligible for the tax credits.
Also bear in mind that the homeowner tax credit is just $1,500 total for most types of improvements. Given the aggressive promotions of many manufacturers and installers, your clients may be under the mistaken impression that they get a $1,500 tax credit for their new windows, another $1,500 tax credit for their new roof, another $1,500 for their new insulation, etc.
For improvements to the building envelope — windows, doors, skylights, roofing, and insulation — the tax credits are limited to 30% of the cost of the qualifying goods, with a maximum credit of $1,500. Keep in mind that this is a one-time-only credit. In other words, if a homeowner purchased windows qualifying for the full $1,500 credit and then purchased a roof that also qualified for the tax credit, he or she would be eligible to claim only a single credit of $1,500.
Product Plus Labor
With HVAC and renewable, however, the 30% tax credit is not capped, and the credit is based on product and installation. A homeowner could, for example, qualify for a $1,500 tax credit for windows based on product only, and also qualify for a tax credit for a qualifying solar water heating system based on 30% of the solar system’s total purchase price, including installation.
A taxpayer must file a 1040 form to claim the credit. You cannot claim the credit if you are filing a 1040EZ tax form.
Expanded coverage, including IRS rules, updates, and interpretations, can be found online at:
Or, for more information on the American Recovery and Reinvestment Act of 2009, you may visit the IRS online at:
From Remodeling Magazine