Energy Star Tax Credits And The First Time Home Buyer Tax Credit

Q: First of all, I would like to say I really enjoy reading ThinkGlink Newsletters weekly. I am writing today in hopes that you can answer a question for me.

A relative told me that I could qualify for the $8,000 tax credit if I schedule home improvement projects to be done. Is this true? Also, I purchased my home back in 2005. Would this still allow me to qualify?

A: You do not qualify for the $8,000 first time home buyer tax credit. To qualify for this tax credit you need to be a first time home buyer. That is to say you must not have owned a home for the last three years. In your case, you are a homeowner and do not qualify.

The other home buyer tax credit that is now available is a $6,500 tax credit. You would only qualify if you are buying a new home and have lived in your current residence for five out of the past eight years.

Since you’re not buying another home and you have not owned your current home for five years, you don’t qualify for this tax credit either.

The good news for you is that you may be entitled to a small tax credit for some home improvement projects if those home improvement projects related to energy saving issues or if you buy certain energy saving appliances and fixtures.

If you add insulation to your home, you may be entitled to a tax credit on part of that purchase and installation. If you buy a high efficiency furnace, you may be entitled to a tax credit on part of the purchase.

According to the IRS, you can obtain a tax credit of up to 30 percent of the cost of certain energy-efficient property or improvements for 2009 but the tax credit is limited to $1,500. Some of the items listed as permitted for the tax credit include high-efficiency heat pumps, air conditioners and water heaters; as well as energy-efficient windows, doors, insulation materials and certain roofs. And, if you plan to install solar energy panels, wind energy projects and some geothermal heat pumps, you may qualify for the credit without a dollar limitation.

In each instance, you must make sure that the work you are doing to the home would qualify for the tax credit. Don’t forget to keep all of your paperwork as evidence that you purchased the items and that you made these improvements to your home.