Residential Energy tax credits have been extended until December 31, 2010. Many of the caps, or limits on the tax credit amount you can claim, have been eliminated.
With the exception of a biomass stove, you may be able to take a credit of 30% of your costs of qualified solar electric property, solar water heating property, fuel cell property, small wind energy property, and geothermal heat pump property. This includes labor costs properly allocable to the onsite preparation, assembly, or original installation of the property and for piping or wiring to interconnect such property to the home.
Biomass Stove 30% of cost, up to $1,500*
Stove which burns biomass fuel to heat a home or heat water with a thermal efficiency rating of at least 75%.
Biomass fuel is defined as “Any plant-derived fuel available on a renewable or recurring basis, including agricultural crops (corn) and trees, wood and wood waste and residues (including wood pellets), plants (including aquatic plants), grasses, residues, and fibers.”
*Subject to a $1,500 maximum per homeowner for all improvements combined (storm windows, doors, roofing, insulation, etc.)
Geothermal Heat Pump 30% of the cost – NOT subject to $1,500 cap
Frankly, $1,500 isn’t much incentive to purchase a $40,000 system, but $12,000 (30%) is. Especially when you consider a geothermal heat pump will deliver as much as $5.50 in heating or cooling for every $1 spent on electricity.
Solar Water Heating 30% of cost, up to $2,000
At least half of the energy generated by the “qualifying property” must come from the sun. Homeowners may only claim spending on the solar water heating system property, not the entire water heating system of the household. The credit is not available for expenses for swimming pools or hot tubs. The water must be used in the dwelling.
The system must be certified by the Solar Rating and Certification Corporation (SRCC) and placed in service before December 31, 2016. The IRS defines “placed in service” as when the property (installed equipment) is ready and available for use.
Photovoltaic Systems 30% of cost – After January 1, 2009 the $2,000 cap no longer applies
Photovoltaic systems must provide electricity for the residence, and must meet applicable fire and electrical code requirements. Must be placed in service before December 31, 2016.
Photovoltaic systems (solar panels for electricity), at best, convert only 18% of the sun’s rays to electricity. This relative inefficiency is why you need so many panels to put a noticeable dent in your electric bill. So until someone comes up with a 30% efficient solar panel, the 30% percent tax credit will put a sizeable dent in a typical $20,000 installation.
Radiant Hot Water Heating
Radiant heating isn’t mentioned specifically on the tax credit schedule, but a solar water heater, as mentioned above, used for radiant home heating would qualify for the credit.
Residential Small Wind Energy Systems 30% of the cost – Not limited to $1,500 cap.Must be placed in service before December 31, 2016.
No matter what type of system you purchase, verify the tax credit with your accountant before signing a formal agreement with your energy contractor.
Owners of rental property usually grumble of skyrocketing real property taxes. And this becomes worse for rental property owners who have included operational expenses in the maintenance of their properties occupied by their tenants. These taxes are in fact extra expenses. Actually, there are cases that they see these taxes as nuisance to the business operation. The Federal government understands their sentiments about these taxes and thus t prompted them to come up with tax benefits that will surely ease out the burdens of rental property owners. So if you happen to share the same feelings with the owners, go over this tax deduction checklist.
One of the very common tax advantages for rental establishments is depreciation. Usually, any rental infrastructure is being depreciated over a period of time and it the computation will be based on the amount of depreciation every year. The property depreciation over the time is termed as claims against the payable property taxes. Thus, it is essential that the owners of the building must maximize the use of their property. Owners should be able to properly keep track of the deduction since this can be a big savings for them.
Aside from that, another tax benefit is the local travel expenses. One of the important parts of rental property business is to perform a regular check up and visit his rental establishment as part of his property management. This will allow him to determine the possible issues that his tenants might be complaining for. This should be done through his personal appearance in the said property. Thus, the owner should travel all the way from his house to the rental property. If the property is located just around the corner of the owner’s house, then that would be advantageous on his part. He does not have to exert more effort to check the place everyday.
Needles to say, if the rental structure is quite far from where he resides, then he would have to spend some of his money for his transportation expense. There are even cases where the owners would take the plane simply to cross other cities and visit his rental business on the other part of the globe. And thus, this can really be very expensive on their part since this should be done on a regularly basis. So the nice thing about tax deductions for rental owners is the expenses that you incurred for the gas, hotel accommodations and meals can now be credited to your real property taxes. What a great way to reward the hard work of the owners to maintain the quality of their properties.
For owners of this type of business, you need to be aware of these tax deductions since they will surely be of big help to you and to the operation. Even if you are new to this endeavor, you are not exempted from knowing your tax benefits. This is one way of rewarding the rental property owners for their huge contribution to the real estate industry as well as to the government.
From the day you first purchase a property for rental you will have tax deductions. So all paperwork needs to be kept. One of the first pieces of information you will receive is a settlement statement from your conveyancer, this will have the purchase price of the property stamp duty and pro rata amounts for property rates and taxes.
The conveyancer letter has 2 types of expenses, one is capital which includes the purchase price of the property, stamp duty, registration of mortgage, search and settlement fees and the conveyancer or legal fees. These are not tax deductible and form part of the capital gain calculation at the sale of the property.
The second expense on the conveyancer letter is the pro rata amounts for council rates, water rates, body corporate fees and other fees or levies that your State may charge. The expenses are tax deductible and will need to be included on you tax return. When purchasing a rental property most will borrow a substantial part of the properties value from a financial institution. Of course financial institutions charge up front application and legal fees for your loan. If these amounts are less than $500 then they can be claimed in the first year, otherwise the borrowing costs will need to be claimed over a 5 year period.
Now we come to the day to day running of the property, you will receive rent from your tenants, which is included as income, you may also receive a reimbursement from the tenant for excess water usage, this to is income. If you were unlucky and had a bad tenant and needed to make a claim against the bond or your insurance, the amounts received will also be included as income. Most claims from insurance and the bond will also have a corresponding deduction for the repairs.
General rule of thumb with any tax deduction is that it must be relevant to an income producing activity, the most common tax deductions are;
Advertising for tenants,
Interest payments on a loan,**
Monthly or annual Loan fees,
Insurances, Land tax,
Body corporate/Strata fees,**
Lease document expenses,**
Property management fees,
Quantity surveyor’s fees,
Repairs and maintenance,**
Emergency services levy,
Tax related expenses,
Travel and car expenses in relation to the property,**
Phone Calls to tenants or property manager,
Stationery (rent books),
Some of the above expenses marked with the double asterisk** will need to be expanded on, which will be subject matter in future blog posts.
