2 Types of Energy Tax Credits to Take by Year End

In February, the federal tax credit was reinstated for energy efficient home improvements made in 2012 and 2013. A tax credit is a direct reduction of taxes due. It can be better than a tax deduction that only reduces taxable income. 

The energy tax credit now has a $500 lifetime cap for qualified energy efficient upgrades to your existing principal residence, but the deadline is December 31. New homes and rentals do not qualify. You'll find all the details on: http://www.energystar.gov/taxcredits. The highlights: 

1. Tax credits for 10% of the cost. You may claim a tax credit of 10% of the cost of certain energy-saving upgrades. These include qualified insulation, windows, roofs, and doors, with a $200 limit for all doors.
  
2. Tax credits for the full cost. You can claim tax credits for the full cost of specified types of "qualified residential property," but only up to certain caps. For example:

• advanced main air circulating fan – $50
• natural gas, propane, or oil furnace or hot water boiler with annual fuel utilization rate of 95 or greater – $150
• electric heat pump water heater with minimum 2.0 energy factor – $300
• electric heat pump or central air conditioner that achieves the highest efficiency tier of the Consortium for Energy Efficiency – $300 each
• natural gas, propane, or oil water heater that has either a minimum energy factor of 0.82 or a minimum thermal efficiency of 90% – $300
• biomass stove that uses "plant-derived fuel available on a renewable or recurring basis" (see site for details) – $300

You'll need to file IRS Form 5695 with your tax return and have the Manufacturer's Certification Statement that the item meets the efficiency requirements on the energystar.gov website. That site also lists a few alternative energy items (such as solar panels) that qualify for tax credits after December 31. 


Please consult a tax professional before making any purchases you think will qualify for a tax credit. 

Pending Home Sales Near Three-year High

More homebuyers signed contracts to buy last month than any time since April 2010, according to the National Association of Realtors. And, not counting tax credit-induced spikes, pending home sales last month were the highest in six years.

Pending sales of existing homes, or contracts signed but sales not yet closed, rose 4.5 percent from December and were up 9.5 percent from a year ago.

"Favorable market conditions and job growth have unleashed a pent-up demand," said NAR Chief Economist Lawrence Yun. "Most areas are drawing down housing inventory, which has shifted the supply/demand balance to sellers in much of the country."

The Washington-based association has also revised higher its expectations for price gains this year, to 7 percent or more, from its previous forecast of home values rising as much as 6 percent.

Pending home sales rose in all regions of the country, led by the Midwest, where contract activity was up nearly 18 percent from a year ago.

Data courtesy of Jeff Clabaugh, Washington Business Journal.

REALTORS Working Hard For Everyday People

·         Mortgage cancellation relief is extended for another year. Households that have mortgage debt forgiven by a lender in 2013 as a result of a modification, short sale, or foreclosure will not have to pay tax on the amount forgiven.

·         Mortgage insurance premiums ­remain deductible. Tax filers making less than $110,000 who pay for mortgage insurance can deduct the cost of their premiums on their 2012 and 2013 tax returns.

·         15-year straight-line cost recovery on leasehold improvements is extended. For qualified leasehold improvements on commercial properties, 15-year depreciation is extended through 2013 and made retroactive to cover 2012.

·         Energy efficiency tax credit remains in force. The 10 percent tax credit, up to $500, for home owners who make energy efficiency improvements to an existing home is extended through 2013 and made retroactive to cover 2012.