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The Insulation Guys
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 Tax Credits

Tax Credit

Step 1:
Engineer your home with EnergyWise
For more information visit:
http://www.energywisestructures.com/

Step 2:
Use Sealection 500 Agribalance or Heatlok Spray Foam Insulation
For more information visit:
http://www.demilecusa.com/

Step 3:
Have your home be H.E.R.S. tested
For more information visit:
http://www.energystar.gov/

Step 4:
Fill out IRS form 5695  and submit with your tax returns
For more information visit:
http://www.irs.gov/

Step 5:
Retain your copies of the certificates above

Tax Credit Overview

Residential New Construction Tax Credit
A $2000 tax credit for new homes that are at least 50% more efficient than required by current building codes will encourage builders (who do not pay the energy bills for the homes they build) to construct energy-efficient houses, and increase the market for efficient technologies and practices

Residential New Construction Tax Credit Requirements
Residential Existing Home Tax Credit

Consumers who purchase and install specific products, such as energy-efficient windows, insulation, doors, roofs, and heating and cooling equipment in their home can receive a tax credit of up to $500 in 2006,2007, and 2009. 2008 Updates do not apply.

Residential Existing Home Tax Credit Requirements
Commercial Tax Deduction

This provision offers business taxpayers a deduction of $1.80 per square foot for commercial buildings that achieve a 50% reduction in annual energy cost to the user, compared to a base building defined by the industry standard ASHRAE/IESNA 90.1-2001.Heating, cooling, and lighting commercial buildings accounts for about 9% of total national energy consumption. A tax credit for new and renovated buildings that use 50% less energy than required by building codes will encourage owners to install efficient technologies and will help reduce natural gas and peak electric demand.

Commerical Tax Deduction Requirements
TAX Credit Most FAQ

How many tax credits are there? There are two tax credits and a tax deduction. There is a tax credit for builders on new construction, a tax credit for homeowners who make energy efficient upgrades to their existing homes, and a tax deduction for commercial property owners who reduce energy consumption of their buildings.

How does a builder get the new construction tax credit?
A builder must design the house to be 50% more efficient than a model IECC home. You can use numerous approved computer software to accomplish this. You must then build the home to those specifications and have an energy rater come out at do a performance test on the house.
How does foam insulation fit into the new construction tax credit? The tax credit requires that 1/5 of the efficiency come from building envelope components, which translates do something to stop air infiltration.

Do I have to turn in new paperwork to the IRS to qualify for either of the two tax credits?
No you must keep your receipts and your documentation that your home meets the standards but you do not have to file a ton of new paperwork.

How much insulation do I need to put into my existing home to qualify for the tax credit?
Insulation levels must meet the requirements of the minimum model energy code, which is called the 2004 International Energy Conservation Code (IECC for short). The 2004 IECC includes insulation levels for attics, walls, floors, and basements. However, to qualify for the Federal tax credit, homeowners must only meet the level of insulation required for the area they are insulating. For example, a homeowner can choose only to insulate their attic to the levels required in the 2004 IECC and still be eligible for the tax credit. For most homeowners, this will mean adding an additional R-19 to R-30 insulation to their attic. If a homeowner insulates part of their home to a level below the 2004 IECC, this would not qualify.

What is the new construction tax credit?
Home builders are eligible for a $2,000 tax credit for a new energy efficient home that achieves 50 percent energy savings for heating and cooling over the 2004 International Energy Conservation Code (IECC) and supplements. At least 1/5 of the energy savings must come from building envelope improvements. These tax credits apply to new homes whose construction is substantially completed after August 8, 2005 and that are acquired from the eligible contractor after December 31, 2005 and before January 1, 2008, for use as a residence.
Is there anything out there for Manufactured Homes? Yes there is. There is a $1,000 tax credit to the producer of a new manufactured home achieving 30 percent energy savings for heating and cooling over the 2004 IECC and supplements (at least 1/3 of the savings must come from building envelope improvements), or a manufactured home meeting the requirements established by EPA under the ENERGY STAR program. There is a $2,000 tax credit for the producer who provides a level of heating and cooling energy consumption that is at least 50 percent below that of a comparable manufactured home constructed in accordance with the standards of section 404 of the 2004 Supplement to the 2003 International Energy Conservation Code (2004 IECC Supplement), and to have building envelope component improvements that provide for a level of heating and cooling energy consumption that is at least 10 percent below that of a comparable dwelling unit.

What is a tax credit?
You don't receive an income tax credit when you buy the product, like 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 - such as those for home mortgages and charitable giving - lower your taxable income. If you are in the highest 35-percent tax bracket, the income tax you pay is reduced by 35 percent of the value of a tax deduction. But a tax credit reduces your federal income tax by 100 percent of the amount of the credit.

What energy-efficient home improvements are eligible for existing homes?
The overall $500 cap can be reached in several ways with the purchase and installation of energy-efficient products:

  • Exterior windows: 10 percent of the total cost, up to $200. Includes skylights and storm windows.
  • Insulation, exterior doors, or pigmented metal roofs: 10 percent of the cost of the product (but not the installation), up to $500. Includes seals to limit air infiltration, such as caulk, weather stripping, and foam sealants, as well as storm doors.
  • Central air conditioner, heat pump, or water heater: up to $300 towards the full purchase price, including installation costs.
  • Furnace or boiler: up to $150 towards the full purchase price, and/or $50 for an efficient air-circulating fan in a furnace, including installation cost.

When are they available?
The home improvement tax credits apply for improvements "placed in service" from January 1, 2006, through December 31, 2007 and January 1, 2009, through December 31, 2009. They are not available in 2005 or 2008. 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.

The Insulation Guys
8150 E State Rd 14
Akron, IN 46910
Phone: (574) 930-0636
Email: info@indiana-insulation.com

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