Financing and Tax Credits
Financing your home remodeling project
When looking to finance a home improvement, lenders agree that the basic questions are:
- How long is it going to take to do the whole job?
- How much is it going to cost altogether?
- Do I need the money for anything beyond this particular set of home improvements?
Your answers will determine whether you should choose from finance options such as a credit card, a home-improvement loan, borrowing on your 401(k), borrowing from your portfolio, a life insurance loan, a Title 1 Loan, a contractor loan, a home equity loan or a home equity line of credit.
Professional Home Improvement will work with you within your financial situation, helping you to find the best solution.
2011 Energy Tax Credit: Qualifying home improvements must be installed and ready for use between January 1, 2011 and December 31, 2011 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 2010. The 10% tax credit is a one-time only credit. In other words, if a homeowner purchased windows qualifying for the full credit in 2010 and then purchased a roof that also qualified for a tax credit in 2011, he or she would be eligible to claim only a single credit of 30% off from 2010.
However, a number of energy-efficient home improvement products, such as certain solar-related products, are not subject to this federal tax credit, and thus can be used in conjunction with other products. For example, if a homeowner purchased windows qualifying for the full 10% credit in 2011 and then also purchased a thermal solar water heating system in 2010 that qualified for its own 30% tax credit, he or she would be eligible to claim both tax credits.
Lifetime Cap: There is now a lifetime limit of $500 ($200 for windows/skylights) in total credits that a homeowner can claim from Jan 1, 2006 to Dec. 31, 2011. It is not on top of the $1,500 limit in 2009-2010. So if they have already reached or exceeded the $500 limit, they are no longer eligible to claim the credit in 2011. The $500 aggregate lifetime limit is for any combination of all tax credit qualifying products (HVAC, insulation, siding, roofing, etc), not just windows, doors and skylights. If they have claimed less than $500, they can claim the difference up to the $200 cap for windows and skylights and $500 for exterior doors.
How to Claim 2010 and 2011 Tax Credits
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.
If your work order does not break down the cost of product vs. labor, use the following chart to determine the eligible amount for the material cost:
- Windows: 83%
- Doors: 83%
- Siding: 19% (insulation cost, not siding)
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Professional Home Improvement has a strong relationship with several financing institutions.
Give Mal a call to learn more: 847-253-9500.
More information on tax credits can be found at Energy Star. In addition to home improvements, many other products qualify.