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What does a tax credit mean

what does a tax credit mean

About the Credit

***UPDATE: This Tax Credit may no longer be available; the December 31, 2010 deadline has passed.***

On February 17, 2009, President Barrack Obama signed a "supplemental appropriations" bill, known as The American Recovery and Reinvestment Act of 2009. that called for significant changes to the energy efficiency tax credits.

Part III of Subtitle B - Energy Incentives provides for a modification and extension of tax credit for nonbusiness energy property. The Act allows for a 30 percent tax credit (up to $1,500) of the amount paid for qualified energy improvements plus the amount of residential energy property expenditures paid or incurred.

Windows, Doors, and Skylights now require both a U-Factor and a SHGC (Solar Heat Gain Coefficient) both below or equal to 0.30 in order to be eligible.

If you would like to review the Act yourself you can do so here: The American Recovery and Reinvestment Act of 2009 [PDF]. Pages 208-211 are most relevant for the tax credit.

What does this mean for you?

When you purchase and install qualifying windows or doors (for existing homes only) from Southern Window Design you become eligible to receive a tax credit of 30% of the product cost, up to $1,500 (maximum per homeowner for all improvements combined). This tax credit is only available through December 2010 so don't wait!

How it Works

1. The Act covers energy saving home improvements. This does not mean Energy Star rated products. To be eligible for the Tax Credit, products must meet more stringent requirements than the Department of Energy has mandated for the Energy Star Program.

2. Qualifying home improvements must be installed and ready for use between January 1, 2009 and December 31, 2010 at

the homeowner’s principle place of residence. In the event a purchase was made PRIOR to the law taking effect, the homeowner would still benefit as long as the products are installed and payment is made in 2009. The $1,500 tax credit is a one-time only credit. In other words, if a homeowner purchased windows qualifying for the full $1,500 credit in 2009 and then purchased a roof that also qualified for a $1,500 credit in 2010, he or she would be eligible to claim only a single credit of $1,500.

3. However, a number of energy-efficient home improvement products, such as certain solar-related products, are not subject to this $1,500 tax credit, and thus can be used in conjunction with other products. For example, if a homeowner purchased windows qualifying for the full $1,500 credit in 2009 and then also purchased a thermal solar water heating system in 2009 that qualified for its own 30% tax credit, he or she would be eligible to claim both tax credits.

How to Claim

Homeowners seeking to claim one or more of the available tax credits should complete IRS Form 5695** for the tax year in which the improvement is placed into service. For record keeping purposes, it is advisable for homeowners to retain the work orders or receipts for the qualifying improvement. Taxpayers should also keep a copy of the Manufacturer Certification statement (a signed statement from the manufacturer certifying the product qualifies for the Energy Tax Credit) for their records, although the statement does not have to be submitted with the taxpayer’s tax return.

**The 2010 Form 5695 may not yet be available. If its not here [pdf] (the form may still be for 2009) now it will be towards the end of 2010.

Category: Credit

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