Real Estate Matters | Don’t rush home upgrades just to get a tax credit

December 18, 2013

(Robert F. Bukaty/ASSOCIATED PRESS)

I have a furnace and a roof that will need replacing in the next year or two. Do you recommend I rush to do this before the end of the year for the tax credit?

 One roofer told me the amount of tax credit was not worth it. One HVAC installer told me it only applies to a total system replacement (heat and air). I’d appreciate whatever guidance you can provide.

Every year, for at least the past seven years, Ilyce has had three tax experts come on her show before the end of the year to discuss what’s new with regard to taxes and what consumers should look out for. The experts are Bill Nemeth, Chet Burgess and Merry Brodie. They are all enrolled agents (EAs), which are tax preparers who are licensed to represent taxpayers before the IRS.

To answer your question, we went directly to the source, Bill Nemeth. He wrote that the “maximum tax credit is $300 on the purchase of a qualifying HVAC system (assuming you did not get credit for other energy-saving expenditures since 2006). For reference, the credit was formerly $1,500 for energy-saving devices.”

Further, the roof replacement you are considering “only qualifies for the energy credit if it is made up of white shingles (usually a bad thing since the white shingles will quickly turn green from the normal weathering of the roof) or if it is metal,” he wrote.

Bill said that he and Merry replaced their roof several years ago and found the contractor by consulting Angie’s List. “We were delighted with the price and the quality of work of the contractor, which took just one day to start and finish. Our neighbor replaced his roof in the same month with some ‘guys.’ They were at it for several weeks and the workmanship was not on a par with our roof.”

The problem with rushing to take advantage of a tax credit (which is a dollar for dollar reduction in your taxes, compared with a tax deduction, where you get a percentage savings), is that the maximum amount of the tax credit is limited. You won’t be able to take advantage of the entire amount if you rush to get it done before the end of the year, and you might actually lose money by replacing mechanical systems that still have some life left in them.

Rather than rush into an HVAC install/upgrade, Nemeth recommends that you take some time to study the available alternatives to reduce your costs. Some utility companies will rebate you 10 percent of the purchase price of energy-efficient HVAC, for example.

“The hard lesson we learned first-hand is to check out the various companies offering you the HVAC system. We thought that all companies are pretty much the same — not so. The young kids that installed our new HVAC heat pumps had never installed one before — it took four visits by a senior technician after they left to get it working. When they installed the units, they set it up to use the strangest size filter,” Nemeth recounted.

His advice, which is has nothing to do with taxes but everything to do with being a satisfied consumer, is a good one: Consult with a number of companies and be sure to check references before you decide which company to use for the purchase and installation of your HVAC system.

“We went with a brand name (system) but the install was terrible, and we continue to live with this terrible install, probably until we sell the house,” he added.

And we’ll say this: It’s never a good idea to rush on a big purchase just to get a tax credit. Because the price of living with a bad system or a terrible install over the years is just too high, even if you get a small tax credit as an offset.

Ilyce R. Glink’s latest book is “Buy, Close, Move In!” If you have questions, you can call her radio show toll-free (800-972-8255) any Sunday, from 11 a.m. to 1 p.m. EST. Contact Ilyce through her Web site, www.thinkglink.com.

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