In 2009 and 2010 a lot of people decided to take advantage of the home improvement tax credits for energy efficient improvements.   The tax credits, which were a part of the American Recovery and Reinvestment Act of 2009, allowed you to claim up to $1500 in tax credits on qualified energy efficient home improvements like doors, windows and water heaters among other things.

Hopefully you took advantage in 2009 or 2010, because although the credit has been renewed for 2011, the amount of the 2011 home improvement tax credit has shrunk,  along with the list of things that are qualified for the credit.  From latimes.com

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.

2011 Home Improvement Tax Credit

So the 2009-2010 home improvement tax credit for energy efficient home improvements allowed homeowners to claim up to 30% of cost of the home improvement, up to $1,500.  That tax credit expired on December 31st, 2010, to be replaced with the new tax credit that was included in the same tax package as the extension of the Bush tax cuts.  The amount of the credit has been substantially reduced.  Here are the details.

• Tax credit: 10% of cost of the home improvement, up to a maximum of $500.
• Partial tax credits: Of the $500 total credit, some purchases have their own maximum credit.  We’ll detail those in the section below. (Example, windows have a max of $200 tax credit now.)
• Expires: December 31, 2011
• Provisions: Must be on an existing home & your principal residence.   New construction and rentals don’t qualify.

So to recap, the maximum you can receive in 2011 for home improvement tax credits is $500, and that’s only if you haven’t already taken part and received a credit from the 2009-2010 tax credits, or the 2005-2008 tax credits.  For those that have previously claimed home improvement tax credits totaling more than $500, you are excluded from taking part.

What Energy Efficient Products Are Eligible For The 2011 Tax Credit?

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

• Energy efficient doors and windows.  Installation costs are not eligible for the credit. Other restrictions apply. EnergyStar windows have a max of only $200 eligible for the credit
• Water Heaters. Credit includes installation costs; some restrictions for energy efficiency apply. $300 max credit.
• 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. $300 limit, and furnaces must now be 95% efficient.
• Biomass Stoves.  $300 credit limit.
• 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.  To find out if your product is included, and whether you can include installation costs, check the government site here.

How Do I Apply For The Tax Credit?

To claim the energy efficient products tax credit, you’ll need to claim the credit on your 2011 taxes in 2012.  There will be  a form from the IRS to send in with your return.   (I’ll update with a link once it becomes available).  The product has to be placed in service in 2011.

2011 Federal Income Tax Brackets for your reference.

Reduction Of Energy Efficient Home Improvement Tax Credit Reduces Stimulative Effect?

Since the tax credits have been greatly reduced this year, most believe that it will reduce the likelihood that people will take advantage, and by extension -reduce their stimulative effect.  While some people may have taken advantage in 2009-2010 because the credit could be pretty substantial, up to $1500, the likelihood that someone is going to spend 10 grand on new windows to get a $200 credit is pretty unlikely.  A lot of building industry folks aren’t happy.

The net effect of all this, say home building and remodeling experts, will be to severely diminish consumers’ interest in energy-efficient home improvements. Donna Shirey, chairwoman of the Remodelers Council of the National Assn. of Home Builders and president of a contracting firm in the Seattle area, said the gutting of energy-efficiency credits “is a big step backward. It’s bad for the environment, bad for consumers and, of course, bad for jobs in our industry. We’re heading the wrong way here, sending absolutely the wrong message.”

I happen to agree with those who are saying that having a credit at these minimal amounts is pretty pointless. Why not just remove it all together since it isn’t likely to have much of an effect anyway?

What do you think about the new 2011 home improvement tax credit? Will lessening the amount cause less people to take advantage, and will you be attempting to buy something before the 2010 tax credit runs out?  Do you plan to take advantage in 2011, despite the minimal amounts?  Tell us your thoughts in the comments!

• 2010 Home Improvement Tax Credits For Energy Efficient Products (Insulation, Windows, Heaters, Etc)
• When Will We See An Increase In Our Paychecks Due To The Stimulus Package?
• Unclaimed Tax Refunds: Do You Have A Refund Waiting For You?
• How To Check The Status Of Your Federal And State Income Tax Return

Earlier this week President Obama spoke with seniors at a town hall meeting in regards to the Medicare Part D prescription benefit, and talked about how many of those seniors would be receiving a $250 check in the mail as a result of the health care reform passed earlier this year. Today I thought I would explain a bit more about that rebate check being sent out, who will get it, and when they can expect it.

What is the Medicare Doughnut Hole?

One thing that may not have been explained adequately is – just what exactly is the Medicare doughnut hole?

From HealthCare.gov

Medicare Part D provides prescription drug benefits to Americans on Medicare. This benefit comes with a $310 deductible. After you’ve spent $310, you pay 25 percent of the cost of your prescriptions until the total cost of all the medicine you have received in a year hits $2,830. Then, you are stuck with 100 percent of the bill until the total cost of your medicines hits $6,440. The gap when Medicare does not cover the cost of your prescription drugs is known as the doughnut hole.

Health reform will close the doughnut hole. Reform also offers immediate relief by providing a $250 rebate this year to seniors who hit the doughnut hole.

According to CBS News White House Correspondent Mark Knoller the checks could start going out as early as this week.

Obama says as more seniors hit the donut hole, more checks will hit the mail – helping 4 million seniors by the end of this year.

So over 4 million checks being sent by the end of the year – that’s a lot of people in the doughnut hole!

Who Will Get A $250 Medicare Donut Hole Check?

Ok, so how do you qualify to get a check?  First, you have to be signed up for the Medicare Part D prescription drug benefit.  Here’s how it works:

• The prescription drug benefit has a $310 deductible.
• Once the deductible is paid, Part D covers 75% of your benefit up to $2,830.
• After $2,830 in drugs are paid for, you’ll have to pay 100% of your drug costs, up until $6,440.
• After $6440 Part D pays for 100%.
• If you are stuck in the $2,830-$6,440 doughnut hole, you should be receiving a check to help offset the costs.

So if you’re stuck in the doughnut hole you’ll be receiving a small amount of help via the check to help pay for your drugs.

When Are The Checks Being Sent?

The checks are starting to be mailed out this week, and as mentioned above as many as 4 million seniors will receive the check by year’s end.

The $250 checks will be mailed by the Department of the Health and Human Services (HHS), and the HHS logo (see image above) will be clearly displayed on the envelope. It will also include Medicare’s 1-800 toll-free number in case Medicare beneficiaries have any questions. It should be noted that the checks will be mailed by one of Medicare’s contractor. The envelope will include the contractor’s Wisconsin address in case any checks are returned for follow-up.

So if you’re already in the donut hole for the year, keep your eye out for your check in the mail – it should be on it’s way.

Note: There is no need to go through an application process or file anything to receive your check. Once you reach the threshold, the check will be sent automatically.

Medicare Part D Donut Hole Starts Going Away In 2011

The Health Care Reform bill that goes into effect soon made changes that will include closing the donut hole gap.

Among the donut hold changes:

• Beginning in 2011, seniors in the donut hole will receive a 50 percent discount on prescription drugs.
• The Medicare share of costs will increase so that the donut hole will be completely closed in 2020

Stay tuned for further developments!

Are you slated to receive your check this year?  Will it make much of a difference for you?  How do you feel about the rebate checks? Tell us your thoughts in the comments.

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A while back we talked about the energy efficiency tax credits for home improvements that are available through the end of 2010 for homeowners to upgrade their windows, heaters, insulation and other energy efficient products. Now it sounds like the government is considering passing another program, the Homestar Program, that would give rebates to homeowners for investing in energy saving home improvements.

From WhiteHouse.gov:

In his State of the Union address, the President called on Congress to pass a program of incentives for homeowners who make energy efficiency investments in their homes. 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 it looks like they would like to help get people in the construction trades back to work, and this initiative is supposed to help in doing that. So how does the Homestar Program work?

Energy Saving Home Improvement Bill

The Homestar Program hasn’t been passed yet, but with unemployment in the construction fields hovering near 25%, the administration would like to get the program passed in order to help jumpstart economic recovery by boosting demand for energy efficiency products and the install and construction services that go along with them.  It also aims to help save families money by increasing the energy efficiency of their homes – leading to less energy usage.

Homestar Program Details

Components of the Homestar Program include (from the government site):

• 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. A broad array of vendors, from small independent building material dealers, large national home improvement chains, energy efficiency installation professionals and utility energy efficiency programs (including rural utilities) would market the rebates, provide them directly to consumers and then be reimbursed by the federal government.
• $1,000 – $1,500 Silver Star Rebates: Consumers looking to have simple upgrades performed in their homes would be eligible for 50% rebates up to $1,000 – $1,500 for doing any of a straightforward set of upgrades, including: insulation, duct sealing, water heaters, HVAC units, windows, roofing and doors. Under Silver Star, consumers can chose a combination of upgrades for rebates up to a maximum of $3,000 per home. Rebates would be limited to the most energy efficient categories of upgrades—focusing on products made primarily in the United States and installed by certified contractors.
• $3000 Gold Star Rebates: Consumers interested in 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. Consumers could receive additional rebate amounts for energy savings in excess of 20%. Gold Star would build on existing whole home retrofit programs, like EPA’s successful Home Performance with Energy Star program.
• Oversight to Ensure Quality Installations: The program would require that contractors be certified to perform efficiency installations. Independent quality assurance providers would conduct field audits after work is completed to ensure proper installation so consumers receive energy savings from their upgrades. States would oversee the implementation of quality assurance to ensure that the program was moving the industry toward more robust standards and comprehensive energy retrofit practices.
• 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. This will help ensure that consumers can afford to make these investments.

According to the White House consumers in the program are expected to see savings of  “between $200 – $500 per year in energy costs”, which for many would make the program worthwhile.

Where Is The Homestar Program Currently?  Has It Passed?

As of  right now the Homestar Program bill has not yet been made into law.  On May 6th, 2010 it was passed by the House of Representatives in congress.  Next up will be a vote in the Senate.  If it passes there it stands to be signed into law by the President shortly after.

If you’re looking into doing some energy saving home improvements to your home,  you might want to wait a while as this program differs from the current home improvement tax credit – it is a 50% rebate, instead of a 30% tax credit.  You could stand to make out better if the bill passes!  Stay tuned!

Have you been thinking about doing a energy saving home improvement? If so, will news of this potential new law cause you to wait and see, or are you moving ahead and claiming the tax credits from the current program?  Tell us your thoughts on the bill in the comments!

• Unclaimed Tax Refunds: Do You Have A Refund Waiting For You?
• 2011 Home Improvement Tax Credits For Energy Efficient Products (Insulation, Windows, Heaters, Etc)
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• 3 Reasons Why A Big Income Tax Refund Is A Horrible Thing

Congress has extended energy efficiency tax credits for most homeowners through the end of 2010, so if you’ve been looking to upgrade your water heater or windows and doors, you can probably still get a tax credit in the coming year.  Some less common of the tax credits for home improvements will be around all the way until 2016.  From EnergyStar.gov

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

Update: The tax credits will expire on 12/31/2010, but a new one has been passed. 2011 Home Improvement Tax Credit

Energy Tax Credits Extended Through 12/31/2010

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

So what does this mean?  For any qualified upgrade, the tax credit is 30% of the covered cost up to a $1500 total credit. For instance, if you pay $4000 for a central air conditioning system (excluding installation costs), your credit would be $1200.

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 Energy Efficient Products Are Eligible For The 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.
• 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.
• 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.  To find out if your product is included, and whether you can include installation costs, check the government site here.

How Do I Apply For The Tax Credit?

To claim the energy efficient products tax credit, you’ll need to claim the credit on your 2009 or 2010 taxes.

For products “placed in service” in 2009, you need to file the 2009 IRS Form 5695 and submit it with your 2009 taxes (by April 15, 2010). Currently, only a DRAFT version of the 2009 IRS Form 5695 is available (without the instructions section).  The final 2009 IRS form will be available in late 2009/early 2010.

So to claim the credit in 2010, the product will have to be placed in service in 2010.  Same for the 2009 credits. 2009 Federal Income Tax Brackets for your reference.

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 energy 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 can not 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 a new roof or water heater or other eligible product?  Do you plan to claim the credit next year?  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!

• 2011 Home Improvement Tax Credits For Energy Efficient Products (Insulation, Windows, Heaters, Etc)
• When Will We See An Increase In Our Paychecks Due To The Stimulus Package?
• Unclaimed Tax Refunds: Do You Have A Refund Waiting For You?
• How To Check The Status Of Your Federal And State Income Tax Return

The homebuyer tax credit closing deadline has been extended until September 30th, 2010 for those who were under contract by April 30th, 2010. Details here.

If you’re a first time homebuyer and you thought that you might be out of time when it came to getting the $8000 refundable tax credit, think again!  On Friday the Obama administration signed into law the Worker, Homeownership, and Business Assistance Act of 2009 which extends the $8000 refundable tax credit through the end of June of 2010.    If you had given up looking for a house, it may be time to restart your search!

$8000 First Time Home-buyer Tax Credit Extended

The new law was agreed upon by Congress last week, and then signed into law by President Obama at the end of the week.   The extension of the tax credit does mean that there are a few changes in the provisions, including higher income limits, age restrictions and limits on home values.

• The credit is available for homes that go under contract by April 30, 2010 and close by June 30, 2010 September 30th, 2010.
• First-time buyers (those who have not owned a home for three years) can continue to claim an $8,000 credit.
• Income limits: $125,000 a year for individuals, $225,000 a year for married couples. (an increase in income limits)
• Homes that cost more than $800,000 aren’t eligible for the credit.
• You must be 18 years old to claim the credit.
• Credit is available for primary residences only (no vacation homes)

$6500 Move-Up Homebuyer Tax Credit Passed

In addition to the first time homebuyer bill being extended, Congress also decided to expand the incentives for homebuyers by allowing some current owners to take part as well. Current homeowners can now buy a new home and receive a $6500 tax credit.  Details of the new incentives here:  $6500 homebuyer tax credit.

What do you think of the tax credit being extended?  Are you relieved because you just missed the deadline before?  Are you upset because you’re against the credits?  Tell us your thoughts on the tax credit extension and expansion in the comments below.

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Last week I wrote about how congress was attempting once again to pass an extension of the $8000 first time homebuyer tax credit.  There had been several false starts to get an extension passed as the senate and congress weren’t able to agree on amounts of credits, whether to extend the credits at all, and whether it should be expanded to include current homeowners.

Earlier this week congress was finally able to come to an agreement on an extension of the $8000 first time homebuyer tax credit, and in addition, they added on a new $6500 tax credit for people who already own a home. This morning President Obama is expected to sign into law the Worker, Homeownership, and Business Assistance Act of 2009 that expands the popular homebuyers tax credit and extends unemployment benefits.

$6500 Homebuyer Tax Credit For Move-Up Buyers Added

For many people the most exciting news is that there will now be a tax credit for current homeowners.   The tax credit for move-up buyers will take effect after the date of enactment
(when the bill is signed).  Unfortunately for those who have already bought a house it doesn’t seem to be retroactive.

• The credit is available for homes that go under contract by April 30, 2010 and close by June 30th, 2010.
• Current homeowners can claim a $6,500 credit as long as the property they are vacating has been their primary residence for at least five consecutive years out of the last eight years.
• Income limits: $125,000 a year for individuals, $225,000 a year for married couples. (these are higher limits than before)
• Homes that cost more than $800,000 aren’t eligible for the credit.
• $6500 tax credit is not retroactive.  (from the language of the bill: “shall apply to residences purchased after the date of the enactment of this Act.”)

So to all those people who have been sitting on the sidelines hoping for a tax credit for current homeowners , some of you are in luck.  Because of the language of the bill a lot of people are still excluded (myself included), but there are still a lot of folks who will now be jumping into the home shopping game.

Will the new $6500 tax credit push  you to start looking for a new home?  Would you consider moving if there wasn’t a tax credit?  Do you think it will have an appreciable effect on the economy and the real estate market?

• Senators Agree To Extend First Time Homebuyer Tax Credit And Allow Up To $6500 Tax Credit For Current Homeowners
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The past couple of months we’ve talked quite a bit about the Cash For Clunkers program, how it worked, and who could expect to receive a voucher towards the purchase of a new car. People were split down the middle as to whether the voucher program was even a good idea, with some saying it was just another example of wasteful government spending – while others said it was a great way to stimulate spending and boost our economy.

We may now have another cash for clunkers type program to debate.  Earlier this year as a part of the American Recovery and Reinvestment Act a new program was announced that would allow people to receive rebates that would be good towards the purchase of a new ENERGY STAR® rated appliance to replace their less efficient models.

U.S. Department of Energy Secretary Steven Chu today announced the availability of nearly $300 million in funding from the American Recovery and Reinvestment Act for state-run rebate programs for consumer purchases of new ENERGY STAR® qualified home appliances.  The new program underscores the Obama Administration’s commitment to make American homes more energy efficient, while helping to support the nation’s economic recovery.

“Appliances consume a huge amount of our electricity, so there’s enormous potential to both save energy and save families money every month,” said Secretary Chu.  “These rebates will help families make the transition to more efficient appliances, making purchases that will directly stimulate the economy and create jobs.”

The new funding will be awarded to states and territories, through their energy offices, using a formula set forth in the Energy Policy Act of 2005.  Each state or territory is required to submit a plan that specifies which ENERGY STAR® appliance categories will be included in their rebate program, the rebate level for each product type, how the rebates will be processed, and their plan for recycling old appliances.  States and territories must first file an initial application expressing their intent to participate by August 15, 2009, followed by a full application by October 15, 2009. Approximately 10-25 percent of each award will be spent on administrative costs.

The goals of the program were to spur economic growth, create jobs, save energy and reduce greenhouse gas emissions.  How successful it will be in those goals is anyone’s guess.

Depending on which state you’re in, there is a different amount of money available to use towards rebates, so it is probably best to move on it as fast as you can once the program starts.  To find out how much money your state has to use towards appliance rebates, check this document.

How Do I Take Part In The Cash For Appliances Program?

The program will start some time late fall 2009, and program details will vary state by state.  The states will have the ability to say which appliances are eligible, along with how much of a rebate consumers would get. The energy department has set a deadline of October 15th for states to file formal applications for the program.  Details should become clearer for your state at that time.

Although the details will vary state to state, basically the program will authorize rebates to consumers of $50-$200 for purchases of more efficient household appliances. Unlike with the Cash For Clunkers program, people who take part in the program won’t have to trade in their old appliances. (thank goodness for that!)  It is also expected that the rebates will be stackable along with other rebates currently available.  So if your municipal district offers a $100 rebate towards a refrigerator, you would get that in addition to the federal rebate.

The Energy Dept. expects the bulk of the $300 million to be awarded by the end of November.

What Appliances Are Eligible For The Rebate?

To qualify for the rebate the new appliance must be ENERGY STAR® rated.  Qualified appliance categories eligible for rebates may include (depending upon your state):

• central air conditioners
• heat pumps (air source and geothermal)
• boilers
• furnaces (oil and gas)
• room air conditioners
• clothes washers
• dishwashers
• freezers
• refrigerators
• water heaters

Want to save even more?  Use these coupons to save!

• Lowes Coupons
• Home Depot Coupons

Let The Marketing Push For “Cash For Refrigerators” Begin!

Major appliance manufacturers have been feeling the pinch the past couple of years, with sales dropping and plants being shut down.

The leading appliance makers have felt the pinch. Whirlpool of Benton Harbor, Mich., which controls about 40% of the U.S. market, has seen its sales drop 20% through the first two quarters of this year. North American shipments for its Stockholm-based rival Electrolux, meanwhile, have dropped for a dozen consecutive quarters. Both companies have laid off hundreds of workers, and General Electric (GE) mulled shutting down an entire refrigerator plant earlier this year until deciding to keep it open with a reduced workforce.

Once the program begins I’m sure we can expect to see a huge marketing push, just as we saw with the Cash For Clunkers program.  Anything the appliance manufacturers can do to help spur sales will be helpful for them.  On the other hand, many are doubtful that the program will have much effect because the value proposition in receiving a smaller rebate for an appliance as opposed to a $4500 voucher for an old car just isn’t as motivational.  Many people will probably be able to get by with their old appliance for a while longer.  The manufacturers are hoping that’s not the case.

What do you think about the Cash For Appliances rebate program?  Does it make you more likely to buy a new fridge, dishwasher or water heater? Tell us what you think in the comments!

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I’ve written quite a bit about the cash for clunkers program here on Bible Money Matters in relation to how the program worked, who qualified for the rebate, and how you could go about redeeming your voucher.

The program has now run its course, and now that the excitement has died down people are beginning to wonder if there are any other consequences to the program, specifically when it comes to their taxes.

Cash For Clunkers And Federal Taxes

Many people were concerned that when it came to their federal taxes they might have to treat the $3500-$4500 voucher as taxable income.  When you go to the government’s website, however, they are quick to dispel that notion.  From the cars.gov FAQ:

Is the credit subject to being taxed as income to the consumers that participate in the program? NO. The CARS Act expressly provides that the credit is not income for the consumer.

Since the credit is not treated as taxable income, you won’t have to pay taxes on the voucher for your federal income taxes.

The question still remains, however, will you have to pay state taxes on the voucher/credit?

Cash For Clunkers And State Taxes

The question of whether you’ll have to pay taxes on the credit for state taxes is a bit more murky. From the cars.gov FAQ:

Do I have to pay State or local sales tax on the amount of the CARS program credit? MAYBE. The question of whether a consumer must pay State or local sales tax on the amount of the CARS program credit depends on the sales tax law of each State or locality. Consumers should review the law of their respective States or consult a tax advisor to answer this question.

So the answer is that  yes, you might have to pay taxes on the credit if your state and local authorities say you have to.   I don’t want to post an entire list here of which states do and don’t count the credit as taxable income, but one of my blogging colleagues put together a pretty good list. You can find it here:

Cash For Clunkers Tax Rules

Other Cash For Clunkers Reading:

• Cars.gov – Government’s Official Website
• More Cash for Clunkers Tax Rules
• Cash for Clunkers Taxes for State
• Cash for Clunkers Tax
• Does Cash for Clunkers Affect Your Taxes?

• Unclaimed Tax Refunds: Do You Have A Refund Waiting For You?
• 2011 Home Improvement Tax Credits For Energy Efficient Products (Insulation, Windows, Heaters, Etc)
• 2010 Home Improvement Tax Credits For Energy Efficient Products (Insulation, Windows, Heaters, Etc)
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A few months ago we wrote for the first time about the $8000 first time homebuyer tax credit that the Obama administration passed as a part of the 2009 stimulus bill. The measure was aimed at helping to improve the real estate market that has taken such a huge hit over the past year. They wanted to get the market moving, and get first time homebuyers interested in buying a home instead of just sitting on the sidelines as they have been.

By and large the measure has gotten quite a few people back into the buying process, up to a 1/3 of all sales of existing homes in the past few months have been to first time buyers.  Even so, there are still quite a few people biding their time trying to find the perfect house.  But the time to claim the tax credit may be running out.

$8000 Tax Credit Expires December 1st 2009

The $8000 tax credit is a great deal for people who are first time home buyers.   But let’s review the tax credit and it’s provisions:

• First-time buyers can claim a credit worth $8,000 – or 10% of the home’s value, whichever is less – on their 2008 or 2009 taxes.
• To qualify for the credit, the home must be purchased between Jan. 1, 2009 and Nov. 30, 2009.
• You cannot have owned a house for the past three years to qualify as “first time” buyer. You also must live in the purchased house for at least three years, or you will be obligated to pay back the credit.
• To get the credit, homebuyers have to earn less than $75,000 for singles or $150,000 for couples. If you make more than that you may qualify for a partial credit.

Getting the credit should be pretty easy, just claim it on your return.  One caveat, however.  You have to close on your new house by  November 30th.   That may sound like it’s a long way off, but in reality it’s coming a lot faster than you think.

You may think that you’ll be able to close on your new home right before the November 30th deadline, but you’d probably be wrong. Consider this – according to themortgagereports.com the end of November 2009 will not be a good time to close on your new home:

This is when it starts to get messy.  Check out the calendar.

• November 30, 2009 is the Monday after Thanksgiving Weekend.
• November 28-29, 2009 is a weekend.  No closings on weekends.
• November 27, 2009 is the Friday after Thanksgiving — an unofficial holiday.
• November 26, 2009 is Thanksgiving — an actual holiday. No closings.
• November 25, 2009 is the day before Thanksgiving — a national “half-day”.

So, that backs up the November 30, 2009 first-time home buyer tax credit deadline by 6 days to November 24, 2009 — a Tuesday.

The end of November is thrown for a loop because of the Thanksgiving holidays, and when you’re talking about trying to squeeze in a closing in all that madness, you had better be extremely lucky.   Instead it is suggested that you try and schedule your closing for at least the week of November 16th, just to give yourself some breathing room for things that can often come up in the buying process (problems with the final walk-through, mortgage documentation problems, etc).

Now when you think about closing on a home around November 16th, and considering that normally closings are done 60 days out by default (can be negotiated down in some cases), that means that you would have to put in an agreement on a house by September 16th in order to close on your house in time – that’s only about 3 weeks away!

3 Weeks And Counting To Find Your House!

So this post is a cautionary one in case you’re still considering buying your first home using the first time homebuyers tax credit.    It’s time to get cracking, time to find the house that you want to buy, and time to put in a purchase agreement.  If you wait too much longer, you may find yourself with the short end of the stick and no $8000 tax credit!

Are you considering buying a home using the $8,000 tax credit?  Did you realize that the time to find your new home was so short?   Have you already bought your new house and filed for the tax credit? Tell us about your story in the comments!

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• When Will We See An Increase In Our Paychecks Due To The Stimulus Package?

We’ve been talking a lot recently about the Cash For Clunkers program, and how the program has been successful by some standards, and troubled in other ways.  The program ran out of money one week after it launched, and was only re-launched after congress passed another 2 billion dollars for the program.

Now the program is beginning to run out of money again.  The Obama administration has announced that the Cash For Clunkers program will end on Monday:

The popular Cash for Clunkers program will end on Monday at 8 p.m. Eastern time, the Obama Administration said Thursday.

As of Thursday, the Administration said the Clunkers program, officially the Car Allowance Rebate System, had recorded more than 457,000 dealer transactions worth $1.9 billion in rebates.

“Applications for rebates will not be accepted after 8 p.m. EDT Monday and dealers should not make further sales without receiving all the necessary paperwork from their customers,” the Administration said in a statement.

The Administration expressed confidence that money would be available to pay all eligible rebates. A total of $3 billion has been allocated to the program.

The Department of Transportation “has been very focused on making conservative assumptions about this program, and it’s precisely why they’ve announced the winddown at this moment,” a senior Administration official said.

The Administration has countered recent complaints of payment delays by saying that many of the applications to the program from dealers have been incomplete and needed additional review or had to be sent back.

Want to take advantage of the program before it runs out?  Don’t forget to read our posts detailing the program, and get to your participating dealer before 8pm eastern on Monday!

• Cash For Clunkers Eligibility
• Common Questions About The Cash For Clunkers Program Answered; FAQ

Also, if you’re signing a deal this weekend, be careful of what you’re signing as some dealers are adding clauses to the contract stipulating that you will have to pay them back for your clunker rebate if the voucher is denied by the government.

Dealers Opting Out Of Cash For Clunkers

In the last week or so a large number of dealers have been opting out of the Clunkers program as they have been having major problems even getting paid for the Clunker deals that they have signed and sent to the government for approval.   In a cash important business like the car business, this could be a huge problem for a lot of dealers.

Some dealers..  already have stopped participating in the $3 billion Cash for Clunkers program. On Wednesday, Transportation Secretary Ray LaHood sought to assure dealers that they will be reimbursed for money they have essentially fronted to customers buying cars.

“They’re going to get their money,” he said.

The Greater New York Automobile Dealers Association, which represents dealerships in the New York metro area, said Wednesday that about half of its 425 members had left the program because they could not afford to offer more rebates. They also are worried about getting repaid.

In the Kansas City area, program delays prompted Randy Reed’s Buick-Pontiac-GMC and Nissan dealerships to stop participating in Cash for Clunkers on Monday. Including a dealership in St. Joseph, Reed said his stores had not been reimbursed yet for about 40 deals.

“It seems like a program the government has mismanaged from the start,” he said. “Our number one goal is not do anything to put ourselves at risk with our customers. None of us can afford the kind of losses we’re looking at if we continue participating and don’t get reimbursed.”

I for one am not sad to see the Cash For Clunkers program go.  The program, while popular (anytime you “give something away” it’s probably going to be popular), has been beset with problems.  The aim of trying to have a positive environmental impact is dubious at best with even environmental groups saying they aren’t impressed. The economic impact isn’t really agreed on either with some experts like Alan Greenspan saying that he didn’t think that the program stimulated the economy. Add to that the fact that the program has probably moved many people into a worse debt situation than they were in previously, and I am actually happy that the program is over!

What do you think?  Are you going to be taking advantage of the program in it’s last weekend?  Are you glad to see the program go?  Do you think all of these dealers with pending deals will get paid, or will the government stiff them? Let us know what you think in the comments!

• Cash For Clunkers Program Suspended After Only A Few Days. Here Is Why
• Cash For Clunkers Voucher Program Is Now Available. Things To Keep In Mind When Trading In Your Gas Guzzler.
• Cash For Clunkers Rebate Program Might Save You Money On Your Next New Car Purchase. But Is It A Good Idea?
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