Dec. 2010 — The $858-billion federal tax bill signed into law by President Obama on Dec. 17 was a mixed bag for American homeowners, with elements of both the Grinch and Santa squeezed into the same bulging package.
The goodies for select groups were well-publicized — unemployment benefits extension, payroll tax cuts, continuation of the Bush income tax rates and favorable estate tax treatment for wealthy individuals, among others. The bill even pushed back the expiration date for the tax deductibility of mortgage insurance premiums for another year.
But other provisions in the bill could be bad news for homeowners interested in remodeling projects to conserve energy next year. The legislation slashed the popular tax credits for energy-efficient remodeling from 30% of an improvement’s cost ($1,500 maximum per taxpayer) to just a 10% credit with a $500 maximum for expenditures on insulation materials, exterior windows and storm doors, skylights, and metal and asphalt roofs that resist heat gain.
The bill also clamped new dollar-specific limits on key improvements that previously had been eligible for 30% credits. These include a $150 tax credit limit on the costs of energy-efficient natural gas, propane and oil furnaces, and hot water boilers, plus a $300 credit limit on the costs of central air conditioning systems, electric heat pump water heaters, biomass stoves for heating or water heating, electric heat pumps, and natural gas and propane water heaters.