Tax Credit Information for Minnesota Homeowners

How has the new economic stimulus bill affected the tax credits for energy efficient home improvements in Minnesota?

Minnesota Exteriors wants all Minnesota homeowners to be aware of significant changes to the tax code that took effect as a part of the Economic Stimulus Bill that was signed into law on February 17, 2009.  This law increases the tax credits for eligible exterior home items such as replacement windows, doors and steel roofing installations made between now and December 31, 2010.

What energy-efficient exterior home improvements are eligible?

• Replacement windows including skylights and storm windows.  The windows must meet or exceed both a U Factor and SHGC criteria of less than or equal to .30.  (In general, only some Energy Star rated windows qualify).
• Exterior doors including door/storm door combos that meet or exceed both a U Factor and SHGC criteria of less than or equal to .30.
• Metal roofs with appropriate pigmented coatings and asphalt roofs with appropriate cooling granules that also meet ENERGY STAR requirements are eligible.

The tax credit does not apply to insulated siding.  The IRS clarified that insulated siding does not qualify as an Eligible Building Envelope Component for purposes of the energy tax credit.

Who is eligible to receive the credit?

Individuals who install specific energy-efficient home improvements qualify for the credit.  All the improvements must be installed on or in the taxpayer’s principal residence in the United States.  A principle residence is defined as a home that you own and where you live most of the time.

The home must be in the United States. It can include a house, houseboat, mobile home, cooperative apartment, condominium, and a manufactured home.  New construction homes are not eligible for the credit.  Condo and co-op improvements are apportioned to the owners.

How much is the credit?

The tax credit amount is 30% of the product cost of the energy-efficient improvement measures for windows, doors, roofs and other parts of the building “shell”.  There is a total lifetime cap on the credit amount of $1,500.  Thus, the credit applies to up to $5,000 in total product costs.  The cost to install the products is not eligible for a tax credit.

When is it available?

The home improvements tax credit applies to improvements “placed in service” from January 1, 2009 through December 31, 2010.  The IRS defines “placed in service” as when the products or materials are ready and available for use.  This would generally refer to the installation, not the purchase.

What do I need to do to get the tax credit?

Homeowners will need to file IRS Form 5695 with your taxes.  In addition, you will need to keep receipts proving that you purchased the improvements.  The receipt must show how much of the improvement was for product and how much was for installation.  You must also keep a copy of the manufacturer’s certification.  Products placed in service in 2009 must be filed on a homeowner’s 2009 tax return and products placed in service in 2010 must be filed on a homeowner’s 2010 tax return

Minnesota Exteriors will supply the proper invoice and a copy of the manufacturer’s certification to you when the job is complete.  Taxpayers must keep a copy of the certification statement for their records, but do not have to submit a copy with their tax return.

Can I get $1,500 in 2009 and another $1,500 in 2010?

No – even if you purchase multiple products you can only get a maximum of $1,500 over the 2-year period (2009 & 2010). Basically you can spend up to $5,000 during this 2 year period on a single or multiple products and get 30% or $1,500 (30% of $5,000 = $1,500) back as a tax credit. If you get the entire $1,500 credit in 2009, then you can’t get anything additional in 2010.

What is a tax credit and why is it more valuable than a tax deduction?

You don’t receive an income tax credit when you buy the product as you would with an instant rebate.  You claim the credit on your federal income tax form at the end of the year.  The credit then increases the tax refund you receive or decreases the amount you have to pay.

Tax credits vs. tax deductions:  In general, a tax credit is more valuable than a similar tax deduction.  A tax credit reduces the tax you pay, dollar-for-dollar.  Tax deductions, like those for home mortgages and charitable giving, lower your taxable income.  If you are in the highest 35% tax bracket, the income tax you pay is reduced by 35% of the value of a tax deduction.  But a tax credit reduces you federal income tax by 100% of the amount of the credit.

Is there an income limit on the tax credit?

There is no upper or lower limit on income for the energy efficient tax credits.

However, these energy efficiency tax credits are technically “non-refundable.” which means you can’t get more money back in tax credits than you pay in federal income taxes (your tax liability).  Tax credits are being administered by the IRS.

Minnesota Exteriors proudly installs products that qualify for the $1500 tax credit including:

• Andersen Windows Eco Excel package
• WeatherShield Windows
• Vista Windows
• Donlin Doors
• Edco Steel Roofing

To learn more about how you can take advantage of the tax credits offered to homeowners by the Economic Stimulus Bill you can call Minnesota Exteriors at 763-515-4851.

Minnesota Exteriors is not a tax advisor.  Please contact your accountants or tax advisor to receive personal guidance.