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Don't miss the deadline for your tax credit!

by Ashlie DuCros

The Wall Street Journal

What You Need to Know About Home-Improvement Tax Credits

The main thing: Act fast

As winter approaches, you may be looking for ways to cut your energy bills. The good news is that the U.S. offers tax credits for many energy-saving home improvements. The bad news: You have to act fast—some of those credits are expiring on Dec. 31. What you need to know:

Journal Report

Read the complete Energy report.

What improvements are covered by the expiring credits?  

Homeowners can get a tax credit for installing certain wood or pellet stoves; energy-efficient furnaces, water heaters and air-conditioning systems; insulated roofs, windows and doors; and wall and ceiling insulation. The tax credit covers 30% of the purchase costs, up to $1,500. (For a full list, check the Energy Star website at

Is the installation cost covered?

 The cost of putting in heating and air-conditioning systems, water heaters and biomass stoves is, but installing new windows, doors, roofs and insulation isn't.

Can I use the tax credits for improvements in a vacation home?

 Sorry, no. The improvements qualify for an existing home that is your primary residence, even if it is a houseboat or mobile home. But rentals, vacation homes and new construction aren't eligible.

With time short, what improvements make the most sense?

Upgrading your heating and cooling, which can be as much as 50% of the average home's energy bill. If your furnace or boiler is more than 10 years old, this may be the ideal time to replace it. All improvements must be in place and equipment in service by Dec. 31 to qualify for the tax credits.

Elwood Smith

What improvements can be done relatively cheaply?

Adding insulation. If you choose to insulate just the area where your family spends most of their waking hours, for instance, the cost will be low but your family will be much more comfortable. And often insulation is a do-it-yourself project, so you save on labor costs.

Am I going to have trouble finding a contractor on short notice?

Not only are contractors available, but many of them are using the expiring tax credits as a marketing tool, according to the National Association of the Remodeling Industry. You can find qualified contractors at the association's website, Many of the contractors have the equipment and materials ready to go, and you'll be helping workers in an industry badly hit by the recession.

Will a new dishwasher get me some tax credits?

Appliances don't qualify, but appliances carrying the Energy Star seal will help reduce your energy bill. Also, many states and local utilities are offering direct rebates—no need to wait for tax returns—on some appliances. Check to see details of programs in your state.

Might the program be reinstated for future tax years?

Legislation has been introduced to extend the tax credits, but experts say it is unlikely Congress will pass it before the end of the year.

Will I be able to handle this on my tax return without having to call on an expert?

The form is simple. Just make sure you save the manufacturer's certificate that states the equipment or service is eligible under the program. If not available with the product, the certificates can also be found on the websites of the manufacturers.

I'm subject to the alternative minimum tax. Will I still be able to qualify for this tax credit?

These credits can be used to offset the AMT, says Gary R. Price, tax partner with Sensiba San Filippo LLP, an accounting firm in the San Francisco Bay area.

Are there any tax incentives for rooftop solar-power systems?

Yes, and they are far more generous. Federal tax credits for solar-energy, small residential wind turbines and geothermal pump systems cover 30% of all costs—installation included—with no upper limit. These are good on both primary homes and vacation homes, new construction or otherwise. And they don't expire until 2016.

—Ms. Lemos Stein is a reporter for

How is the housing market?

by Ashlie DuCros

Daily Real Estate News  |  November 5, 2010  |   Share September Pending Home Sales Slip 1.8%
Pending home sales retreated after two monthly gains, signaling an uneven recovery entering 2011 with some near-term disruptions from the foreclosure moratorium, according to the NATIONAL ASSOCIATION OF REALTORS®. 

The Pending Home Sales Index, a forward-looking indicator, slipped 1.8 percent to 80.9 based on contracts signed in September from an upwardly revised 82.4 in August. However, the index remains 24.9 percent below a surge to 107.8 in September 2009 when first-time buyers were jumping into the market to take advantage of the initial deadline for the tax credit last November. 

The data reflects contracts and not closings, which normally occur with a lag time of one or two months.

“Existing-home sales have shown some improvement but the foreclosure moratorium is likely to cause some disruption and contribute to an uneven sales performance in the months ahead,” said Lawrence Yun, NAR chief economist. “Nonetheless, there appears to be a pent-up demand that eventually will be unleashed as banks resolve their issues with foreclosures and the labor market improves. However, tight credit and appraisals coming in below a negotiated price continue to constrain the market.”

The PHSI in the Northeast slipped 1.7 percent to 59.6 in September and is 28.3 percent below a year ago. In the Midwest the index fell 5.7 percent in September to 64.2 and remains 33.0 percent below September 2009.  Pending home sales in the South declined 3.5 percent to an index of 87.6 and are 19.1 percent below a year ago.  In the West the index rose 3.5 percent to 104.6 but is 24.7 percent below September 2009.

Yun expects the Gross Domestic Product to grow 2.0 to 2.5 percent over the next two years.  With a projection of 1.5 million additional jobs over the next two years, the unemployment rate should decline to 8 percent by 2013 and return to a normal level of around 6 percent in 2015.

“Mortgage interest rates currently are bouncing along the bottom, but are expected to gradually rise and average 4.9 percent next year, then rise to 5.8 percent in 2012,” Yun said.

Existing-home sales are forecast to gradually rise, with some occasional dips along the way.  “For 2011 we should see more than 5.1 million existing-home sales, up from about 4.8 million this year.  Housing starts are expected to rise to 716,000 in 2011 from 598,000 this year,” Yun said.  “We’ve added 30 million people to the U.S. population over the past 10 years, but sales are where they were in 2000, so there appears to be a sizable pent-up demand that could come to the market once the economy gathers momentum.”

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Ashlie DuCros & Associates
Coldwell Banker Previews Global Luxury
21580 Yorba Linda Blvd.
Yorba Linda CA 92887
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