Income Tax Incentives For Home Improvements | Personal Finance ...

Are you planning any home remodeling for 2012? Did you make home improvements during 2011? Some of these may qualify for a tax deduction, either on your 2011 or 2012 taxes. The same tax incentives have been available for several years, but have been reduced from previous years. That doesn?t mean they aren?t worth taking, though.

Home improvement tax deductions are commonly given on qualified energy-saving home improvements. Not all home improvements are, though. For instance, remodeling a bathroom or kitchen, or installing new carpeting, is not deductible. On the other hand, energy-efficient windows and doors are, as are certain energy-efficient appliances.

When you?re shopping for the materials to perform the improvements, keep in mind that the store you purchase from will generally label which items qualify for how much. In general, you?ll find that the following items are the most-covered by the energy efficient improvement tax deduction.

Windows & Doors: 2011 Tax Credit

Windows and doors are one of the most money saving improvements you can make to your home. Practically anyone who has had this done will see a noticeable decrease in their monthly energy bill in addition to the tax incentive. In fact, many professionals estimate that replacement windows will pay for themselves within just a few years. The cost of installation is typically not covered by the tax deduction, so if you plan to have the work done, keep your eyes peeled for free or discounted install offers from retailers.

Insulation 2011 Tax Credit

A cozy home is a happy home. Not only does insulation keep your home warm in the winter, but it can help keep you cool in the summer, as well. Insulation is another area in which you?ll notice a significant difference between the before and after home energy bills.

Older homes that have never been updated are among the worst culprits, but insufficient insulation can also be found in homes in warmer climates that are relatively new. Like windows, the installation cost, although it is part of the overall price you?ll pay, is generally not tax deductible.

Appliances 2011 & 2012 Tax Credit

Energy-efficient appliances such as washers and driers, as well as kitchen appliances, do not qualify for tax incentives, but products like hot water heaters, HVAC units and biomass furnaces did for the 2011 tax year. If you had these products installed in your home, then you can deduct as much as 30% of their value. Unfortunately, these credits weren?t wholly carried over for the 2012 tax year.

For 2012, tax credits are only available for larger energy-efficient home upgrades. Installing solar power, geothermal heat pumps, or a wind turbine will allow you to deduct as much as much as 30% of their cost on next year?s return. It?s significant, however, that each of these products has the capability to significantly reduce and even eliminate your home energy bill, so the tax incentive only makes them more affordable.

Unlike the qualified deductions for the 2011 tax year, the installation cost can be included in the deduction for these technologies. Of course, the greatest benefit to installing these systems isn?t the tax credit, it?s the fact that you could potentially get a check every month from your electric company because you?re producing more electricity than you use.

Source: http://www.purechecks.com/blog/income-tax-incentives-for-home-improvements/

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