tax credit Archives - Page 2 of 2

President Obama And GOP Reach Deal On Extending Bush Tax Cuts. Will Congressional Democrats Go Along?

We've been talking for months now about whether or not Congress and President Obama would be renewing the Bush tax cuts of 2001 and 2003. We've looked at what the 2011 tax rates would be if they weren't extended, and talked about what some of the problems of not extending the Bush tax cuts would be. In the end I wasn't sure that the Democrats and Republicans could find enough common ground on the issue to actually come up with a compromise solution. But last night President Obama and Congressional Republicans agreed in principle to a deal to extend the Bush tax cuts for all taxpayers, including high income earners. Not all Democrats are happy about the deal, so it still remains to be seen what they will do. Here is Obama announcing the deal.

In exchange for allowing an extension of the tax cuts, President Obama was able to get some concessions which are detailed below.

Deal On Extending The Bush Tax Cuts

Last night President Obama announced the deal (see the video to the right), and what it would entail.

President Barack Obama reached agreement Monday with Republican leaders in Congress on a broad tax package that would extend the Bush-era income tax cuts for two years, reduce worker payroll taxes for one year and give more favorable treatment to business investments.

Other elements of the deal include a temporary reinstatement of the estate tax at 35%—the level favored by most Republican lawmakers—as well as an extension of jobless benefits for the long-term unemployed.

“We have arrived at a framework for a bipartisan agreement,” Mr. Obama said on Monday night, capping weeks of negotiations with leaders in Congress.

The outcome of the negotiations is vital, because the current tax levels signed into law by President George W. Bush expire on Dec. 31. Unless Congress acts, tax rates on virtually all Americans who pay income taxes will rise on Jan. 1. That could affect economic growth and even holiday sales.

What Is In The Deal?

To recap, the following were agreed to by President Obama and Congressional Republicans. (No Democrat nod to this plan as of yet).

Extend Bush tax cuts for everyone, for 2 years.
Reduce Social Security tax levied on a worker's wages from 6.2% to 4.2% for one year.
Reinstatement of the estate tax at 35%
Extension of jobless benefits for another 13 months, beyond current 99 weeks.
Extend current tax rates on capital gains and dividends for two years, including for higher earners.
Extend a raft of business tax breaks, including credit for spending on research

Democrats Not On Board… Yet

So far the plan has been panned by Congressional Democrats and the liberal base, and Obama has admitted that there is a tough road to get this deal passed.

In reaching the deal, whose details still need to be worked out, Mr. Obama brushed past the demands of many in his own party to curb tax cuts for the wealthy. Some liberal lawmakers and activists were left seething, particularly over last-minute concessions to Republicans on the estate tax. Democratic leaders didn't agree to the deal during meetings on Monday with Mr. Obama and Vice President Joe Biden, according to a House aide.

“I can tell you with certainty that legislative blackmail of this kind by the Republicans will be vehemently opposed by many, if not most, Democrats,” said Rep. John Conyers (D., Mich.).

In the Senate, Tom Harkin (D., Iowa) called it “an understatement” to say he was disappointed.

So at this point liberal lawmakers and activists are “left seething” at the deal, and convincing them that his is a good idea isn't going to be easy. Obama may need to rely on Republicans to help get this passed.

White House officials will now try to persuade Democrats to back the agreement, but anger on the left suggests that Mr. Obama might need to rely heavily on Republican support to move legislation through Congress.

Republican leaders spoke highly of the agreement. In a statement, House Republican Whip Eric Cantor said, “No one gets everything they want in a deal, but our top priority is to restore certainty to the private sector so that businesses small and large can start hiring again.”

Senate Republican Leader Mitch McConnell also praised the deal and asked that Democrats in Congress now “show the same openness to preventing tax hikes the administration has already shown.”

The Republicans admit that they didn't want to extend unemployment insurance past the current 99 weeks or reinstate the estate tax, but that the political reality was that they would need to in order to come to a compromise.

If Tax Cuts Are Passed, Will It Lead To Growth And More Stability?

Many congressional leaders have stated that in order to get the economy moving again we need to pass something in order to restore a bit of stability for business. They need to know what's going to be happening next year so that they can adjust payroll, plan expenditures and move forward in their planning for 2011. Hopefully if this can get passed it will be a spark that we need to give business a boost.

What do you think about the deal that President Obama announced last night. Do you think it's a good thing, and will congressional Democrats get on board? Tell us your thoughts in the comments.

$1500 Energy Tax Credit For Energy Efficient Home Improvements Runs Out Soon

By Mr. Money 6 Comments

As the end of the year approaches, a lot of people are scrambling to try and schedule work on their homes that they had been putting off. The reason? Most of the tax credits for energy efficient home improvements that were passed a while back will be expiring at the end of the year on December 31st, 2010.

Details Of The $1500 Energy Efficiency Tax Credit

So here are the basic details of the credit.

Tax Credit: 30% of cost of the home improvement, up to $1,500
Expires: December 31, 2010
Limitations: Must be on an existing home & your principal residence. New construction and rental homes don’t qualify for the credit.

So what that means is that for a qualified home improvement, you would get a tax credit of 30% of the covered cost up to a $1500 total credit. For instance, if you pay $3000 for a gas furnac (excluding installation costs), your credit would be $900.

How To Claim Your Tax Credit

In order to get your tax credit, it would need to be claimed on your 2010 taxes.

For products “placed in service” in 2010, you would take the tax credit on your 2010 income taxes.

Your home improvement should have been placed in service in 2010 if you plan to claim the tax credit for the 2010 tax year.

What Energy Efficient Products Are Eligible?

The tax credit for energy efficient home improvements will apply to a variety of energy star rated products, although not all.

If you purchase an energy-efficient product or renewable energy system for your home, you may be eligible for a federal tax credit. …

Please note, not all ENERGY STAR qualified products qualify for a tax credit. ENERGY STAR distinguishes energy efficient products which, although they may cost more to purchase than standard models, will pay you back in lower energy bills within a reasonable amount of time, without a tax credit

Among the most common products to be eligible:

Biomass Stoves.
Energy efficient doors and windows. Installation costs are not eligible for the credit. Other restrictions apply.
Water Heaters. Credit includes installation costs; some restrictions for energy efficiency apply.
Insulation, whether spray foam, fiberglass, or blow-in cellulose, they’re all covered so long as they meet IECC requirements. Installation cost is NOT covered.
HVAC components, including advanced air handlers, air force heat pumps, central A/C units, boilers, propane, and gas furnaces. Tax credits include installation costs.
Metal and asphalt roofs. Credit doesn’t include installation costs.

For more details on what products are eligible, FAQs and more, check out the government site here: Federal Tax Credits for Consumer Energy Efficiency

Deadline To Close On Your Home And Receive Your Homebuyer Tax Credit Extended To September 30th

By Mr. Money Leave a Comment

Last month I wrote about how congress and the White House were considering extending the $8,000 and $6,500 homebuyer tax credits. At the time it wasn't a done deal that an extension would be granted because the provision was being included as a rider on a controversial jobs bill that wasn't sure to pass both halls of congress. Sure enough, the bill didn't pass, and legislators were sent scrambling trying to find a way to pass an extension for the thousands of people thought to be in limbo with their closings on their new homes. If something wasn't done they would lose out on the tax credit.

H.R.5623 Passes And Extends Closing Deadline

Last week congress got the deal done and passed H.R.5623 – Homebuyer Assistance and Improvement Act of 2010. The bill doesn't allow new homebuyers to get in on the tax credit, but gives people who were under contract by 4/30/2010 a few extra months to get their deals finalized, and still receive the credit.

From BusinessWeek.com

Qualified homebuyers who signed purchase contracts before April 30 will have until Sept. 30 to complete paperwork and settle on the house. The original settlement deadline was June 30.

“They’re cheering out there, they’re really rejoicing,” Lucien Salvant, a spokesman for the National Association of Realtors, said of homebuyers. The group sought the extension.

The House voted 409-5 on June 29 to extend the deadline, and the Senate approved the measure on a voice vote last night. Republicans, including Senator Jim DeMint of South Carolina, had tried to block the extension, calling the tax-credit program flawed.

“We only created a bubble, which will eventually burst,” DeMint said on the Senate floor late yesterday as the deadline was about to expire. “For the people who haven’t closed on their homes by today, it’s not that they won’t get their house, only that they won’t get a taxpayer subsidy for having bought a house now rather than later.”

The bill was signed into law on July 2nd by President Obama.

Extension Of Homebuyer Tax Credit Will Make Some Happy – Others Skeptical

I know the passage of this bill will be a relief to many folks who ended up buying a house this spring simply because of the credit, and were horrified to find out they might not close on their house in time.

Whether or not this is a good idea is another story. Many have said that the tax credit only artificially pumped up the real estate market, and is causing another mini real estate bubble. They say the worst is yet to come. May and June have both shown a significant drop in new contracts on homes, and some experts expect that to continue.

What do you think about the tax credit extension? Is it ok since it isn't extending the credit to new buyers – and only extending the deadline for those under contract by 4/30? Have the tax credits and other stimulus created another mini-bubble only delaying a bottom to the market? Tell us your thoughts in the comments.

Will Congress Extend The June 30th Deadline To Close On Your Home And Receive Your Homebuyer Tax Credit?

By Mr. Money 8 Comments

The tax credit deadline has been extended from June 30th, 2010 to September 30th, 2010. Details here.

Over the first few months of this year a lot of people who might not otherwise have been looking for new homes decided to move their timetable up, and purchase the home of their dreams because of the first time homebuyer tax credit. Why not move things up a bit if you can get $8000 cash? When the credit was extended to current homeowners as well, things really started to heat up.

April 30th was the hard and fast deadline to be able to get a signed contract and still qualify for the tax credit. Most people were able to reach that deadline with no problem, however, some are now thinking that they're going to miss the June 30th deadline to complete the sale. If they do, they'll get no credit.

Tax Credit Closing Deadline Extended?

Now there is an amendment to H.R. 4213, “the American Jobs and Closing Tax Loopholes Act of 2010” bill being offered that would offer extra time for homebuyers to close the sale.

The amendment, which is attached to another bill, is being sponsored by Senate Majority Leader Harry Reid, D-Nev., Sen. Johnny Isakson, R-Ga., and Christopher Dodd, D-Conn. It was passed by the senate this week, and now needs to be passed by the House.

The bill would simply extend the time available to homebuyers to complete the sale on their new homes from June 30th to September 30th. So will it pass?

Many Sales May Not Complete Without Extension

The National Association of Realtors has been pushing hard for this bill, but many are saying that even with the extension, many of the sales – especially short sales – will still not complete.

Up to 180,000 buyers who were hoping to close by June 30 and get the tax credit are likely to miss the deadline, according to the National Association of Realtors (NAR).

“We are hopeful,” says Paul Bishop, vice president of research with NAR. “We've heard a lot of concern from Realtors out there. There seems to be a sense of fairness. The tax credit was essentially promised” to those buyers.

But some Realtors say even if a three-month extension is granted, that still won't be enough time for buyers pursuing houses through short sales, which can take many months to close.

“How are you going to close a short sale in two months?” says Edward Goldfarb, a Realtor with Keller Williams in Fort Lauderdale. “Hundreds of people are not going to close and are going to lose their tax credit. September is not any better. A short sale can take a year and a half.”

So a lot of people out there are in a holding pattern, hoping to get their credit. Some of them may get it because of the extension, but it sounds like a lot of folks who are buying short sales still may end up being left out in the cold.

Another concern is that buyers who face losing the tax credit could pull out of pending deals altogether. Any extension must be passed this week, or buyers will start canceling deals next week, before the deadline hits, says Richard Smith, president and CEO of Realogy, parent company of Century 21, ERA, Coldwell Banker and Sotheby's International Realty.

“We're concerned, as many people are, that this will force people to cancel their contracts,” Smith says.

So now it is up to the House to get this bill passed so that some homebuyers can be helped. The question remains – how many will it help?

What do you think – should the deadline be extended past the June 30th deadline? Will it be enough time for most unclosed sales, or will it be a pointless exercise? Tell me your thoughts in the comments!

Cash For Caulkers Home Improvement Rebate: Money To Retrofit Your Home For Energy Efficiency

By Mr. Money 2 Comments

Yesterday I talked about the energy efficiency tax credits for home improvements that homeowners can take advantage of through the end of 2010. They can use the tax credits upgrade their windows, heaters, insulation and other energy efficient products. The Obama administration is now trying to get another program passed to give rebates to homeowners to improve the energy efficiency of their homes. It is called the Homestar Program. (No, it isn't related to THIS Homestar)

Here's a video of the president explaining the bill:

WhiteHouse.gov:

Today, while touring a training facility at Savannah Technical College, the President outlined more details of a new “HOMESTAR” program that would help create jobs by encouraging American families to invest in energy saving home improvements. Consistent with the President’s call for a HOMESTAR program, the Senate Democratic leadership included a proposal of this kind as part of their Jobs Agenda released on February 4, 2010. The President looks forward to continuing to work with Members of Congress, business, environmental and labor leaders to enact a HOMESTAR program into law.

So the president wants to get people back to work and increase the energy efficiency of their homes while he's at it. How will the new rebate program for energy efficient home improvements work?

Energy Efficient Home Improvements Rebate

The bill has several goals, among them increasing energy savings, reducing dependence on foreign sources of energy and helping to easeAims of this bill include:

Get contruction workers/etc back to work to help ease 25% unemployment.
Boost demand for energy efficient products.
Increase energy savings for families. (According to the White House consumers in the program are expected to see savings of “between $200 – $500 per year in energy costs”)

Retrofit Program Details

Details Of What You'll Get With The Homestar Program:

Rebates delivered directly to consumers: Like the Cash for Clunkers program, consumers would be eligible for direct HOMESTAR rebates at the point of sale for a variety of energy-saving investments in their homes. Retailers are reimbursed by the government.
$1,000 – $1,500 Silver Star Rebates: For simple upgrades consumers could be eligible for up to 50% rebates of $1,000 – $1,500. Things included in this are insulation, duct sealing, water heaters, HVAC units, windows, roofing and doors. Rebates are up to a maximum of $3,000 per home.
$3000 Gold Star Rebates: More comprehensive energy retrofits would be eligible for a $3,000 rebate for a whole home energy audit and subsequent retrofit tailored to achieve a 20% energy savings in their homes.
Support for financing: The program would include support to State and local governments to provide financing options for consumers seeking to make efficiency investments in their homes.

When Will Homestar Program Become Law?

On May 6th, 2010 the Homestar Program was passed by a vote of the House of Representatives. Next up will be a vote in the Senate. If that vote also passes it will most likely be signed into law by the President.

Remember, this program differs from the current home improvement tax credit that runs until 12/31/2010. This one is a 50% rebate, instead of a 30% tax credit. You could possibly come out ahead if you wait, and use this rebate instead!

Are you working in construction – and do you think this bill would help improve your work outlook? Looking to improve your home's energy efficiency? Will this bill give you the incentive you need to get those changes made? What do you think?

Home Improvement Tax Credits For Energy Efficient Products: Insulation, Windows, Heaters And More

By Mr. Money 12 Comments

Congress took action a few months back and extended energy efficiency tax credits for most homeowners through the end of 2010. If you’ve been looking to upgrade your water heater or windows and doors, you can probably get a tax credit in 2010. Some of the less common of the tax credits for home improvements will be around all the way until 2016. EnergyStar.gov explains:

If you purchase an energy-efficient product or renewable energy system for your home, you may be eligible for a federal tax credit. …

Please note, not all ENERGY STAR qualified products qualify for a tax credit. ENERGY STAR distinguishes energy efficient products which, although they may cost more to purchase than standard models, will pay you back in lower energy bills within a reasonable amount of time, without a tax credit

Energy Tax Credit Is Extended Through 12/31/2010

So how much is the tax credit, and what do you need to do to get it?

Tax Credit 30% of cost of the home improvement, up to $1,500
Expires on December 31, 2010
Important Provision: Must be on an existing home & your principal residence. Brand new homes and rental properties don’t qualify.

Example: So how does the tax credit work? For a qualifying upgrade, the tax credit is 30% of the covered cost up to a $1500 total credit. For instance, if you pay $3000 for a central air conditioning system (excluding installation costs), your credit would be $900, as long as it was bought and paid for by 12/31/2010.

The house must be your principal residence and the credits don’t apply to new construction. Other, upgrade-specific restrictions apply, so see the government site for details.

What Products Are Eligible For The Energy Efficiency Tax Credit?

A variety of products are eligible for the tax credit, however, you need to be careful that your specific product is eligible. Some of the products include:

Energy efficient doors and windows. Installation costs are not eligible for the credit. Other restrictions apply.
Water Heaters. Credit includes installation costs; some restrictions for energy efficiency apply.
HVAC components, including advanced air handlers, air force heat pumps, central A/C units, boilers, propane, and gas furnaces. Tax credits include installation costs.
Insulation, whether spray foam, fiberglass, or blow-in cellulose, they’re all covered so long as they meet IECC requirements. Installation cost is NOT covered.
Biomass Stoves.
Metal and asphalt roofs. Credit doesn’t include installation costs.

Some of the tax credits will take into account installation costs, while other credits do not. It really does depend upon what you're claiming the credit on. To find out if your product is a part of the credit, and whether you can include installation costs, check out the government website here.

What Do I Do To Get The Tax Credit?

To claim the energy efficient products tax credit, you’ll need to claim the credit on your 2010 taxes. To claim it the product would have to be placed in service in 2010.

To claim the credit submit IRS Tax Form 5695 with your taxes.

Frequently Asked Questions (FAQ) About The Tax Credit

Here are the answers to a few of the most frequently asked questions about the credit.

Is the $1,500 tax credit available for each product? Can I get $1,500 for windows and another $1,500 for a new HVAC system? Can I get $1,500 in 2009 and another $1,500 in 2010? Can two people living in the same home both get the $1,500 credit? 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, for your principal residence that you own and live in, 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. (Note: the maximum does not apply to all products)
Can the energy efficiency tax credit be carried over to future years? The tax credit for products at 30% up to $1,500 cannot be carried over to future years. But you can take part of the $1,500 in 2009, and the rest in 2010. A few select products that are not subject to the $1500 limit can be carried forward. Find details here.
Is there an income limit on the tax credit? No, there is no upper or lower limit on the credit, however, these energy efficiency tax credits are technically “non-refundable.” If you don’t pay any taxes, then you can’t get the credit. Details here.

Are you planning on installing insulation, windows or other eligible product and will you claim the credit? Do you think the credit makes it worth it to install a new energy efficient product, or will you still hold off? Tell us your thoughts in the comments!

Main Menu