Jackson Hewitt Tax Service® focused its weekly series "Jackson Hewitt Tax Time Tips" on reminding homeowners about the tax credits available for certain home improvements.
This Week's Tip: Homeowners who made energy-efficient renovations in 2006 should take advantage of several tax credits when filing their 2006 tax return.
"2006 was the first active year of the Energy Policy Act of 2005, allowing homeowners who made certain types of improvements to claim beneficial credits on their 2006 tax returns," notes Mark Steber, Vice President, Tax Resources of Jackson Hewitt Tax Service Inc. "The Act recognizes a wide range of improvements, from replacing leaky windows to adding insulation. Owners of multi-family units, single family homes, condominiums, co-ops and town houses are all eligible, and improvements must have been made to a primary home within the United States between Jan. 1, 2006 and Dec. 31, 2006 to qualify."
Tax credits vary based on the type of improvement. Qualified energy efficiency improvements and qualified residential energy property costs have a total lifetime limit of $500 and may include certain other limitations. Qualifying expenses and improvements include:
- Adding insulation, exterior doors, and installing metal roofs with a cost-efficient coating allows you a tax credit of 10 percent of the cost.
- Exterior windows are eligible for a tax credit of 10 percent of the expense up to lifetime total tax credit of $200.
- The cost of purchasing and installing qualified heat pumps, central air conditioners, circulating fans, furnaces and hot water heaters is not limited to 10 percent. Heat pumps and central air conditioning units are limited to $300 while furnaces and hot water heaters are limited to $150 and circulating fans are limited to $50.
A tax credit of 30 percent of the cost, up to $2,000, of installing solar water heating systems and solar panels used to generate electricity in your home is available. Additionally, you are eligible for an additional credit of $500 for each half kilowatt of production capacity from fuel cell equipment installed in your home each year.
Steber reminds homeowners that home-related expenses—often the most significant items on a tax return—offer taxpayers the opportunity to itemize a wide range of deductions as well as enjoy other tax benefits. "Working with a tax preparer can help consumers uncover the extra value in a home as it relates to filing their annual tax returns," he said.
Information on all of the credits and deductions relating to a home can be accessed by visiting www.jacksonhewitt.com.
