Energy Tax Credits . . . Q & A - Part III

In this posting we’re going to wrap up the series of Energy Tax Credits questions and answers. So, on to the next question.

Q. If I’m not in the window, insulation, roofing, etc. business, is it difficult to get those products?

A. Get an alliance with a window, insulation, roofing supplier or retailer. They will help you work this out.

Again, we encourage you to do energy loss inspections.

Q. Which roofing qualifies?

A. Most metal roofing. Check www.energystar.com

Q. Don’t all Energy Star windows meet the qualification?

A. Go to www.efficientwindows.org to examine the minimal requirements.

Q. Will the Energy Star stickers on the windows (or other products) have to be submitted by the customer for their tax credit?

A. It is a good idea to have the customer keep the sticker off a window or the package of their product to substantiate their claim.

Q. How do I give credible information to the customer which eliminates my installation costs without jeopardizing my contract?

A. Construct a formula that is realistic and yet protects you. Give this to the customer as a receipt when they pay. Be sure your formula is fair, practical, and consistent.

There is a lot more information and the answers to more questions in the recorded proceedings of the first Home Improvement Economic Summit recorded in April 2009. The entire summit is available on 11 CDs plus an additional CD Rom with the Summit manual and 220 PowerPoint slides. For more information send an e-mail to admin@daveyoho.com or call our office at (703) 591-2490.

That’s all for this time. I’ll have more useful information in the next posting.

Best regards,
Dave Yoho

Energy Tax Credits . . . Q & A - Part II

Let’s pick up where we left off in the last posting with some more questions and answers about the Energy Tax Credits.

Q. How do we present the tax credit to prospects?

A. It is best to have it as a page in your presentation book together with a copy of the certification they will receive. Prospects can be advised to search the websites listed in the last posting for the same purpose.

Q. Is there a special form that customers will have to submit with their tax return?

A. Currently, IRS Form 5696

Q. Suppose our product, i.e. bath refitting, coating, cabinet refacing, etc. doesn’t qualify as an energy saving product?

A. Start offering energy audits. You can use the H.E.L.P. package we’ve developed for this purpose. H.E.L.P. (Home Energy Loss Prevention) is a copyrighted package enabling those who sell windows with CDs, graphs, charts, support forms, energy audit folders and formulas to present this. Request information on H.E.L.P. with an e-mail to admin@daveyoho.com.

Q. Then what do we do?

A. Most bathrooms have a window. On the other side of the ceiling may be an attic (insulation). You can offer these products as a bonus or discount to help the energy crisis.

Q. Does the job then qualify for $1,500 tax credit?

A. Only the portion that relates to the energy credit that you installed.

Remember, you used energy conservation to get the lead and you have made them energy conscious.

Absorb these ideas and consider how you can implement them into your lead acquisition and sales appointment program.

We’ll answer some more questions in the next posting.

Best regards,
Dave Yoho

Energy Tax Credits . . . Q & A

We discussed the excellent marketing potential the new Energy Tax Credits in the massive government stimulus package provide for us in the last posting. There is $6 billion available for home improvement manufacturers and retailers. In order for you to benefit from this opportunity, you need to be well informed and capable of showing the homeowner how they can gain the maximum benefit from this tax credit. So, in the next few postings, we’re going to ask the questions and answer them for you. So, let’s get started . . .

Q: What are the qualifications?

A: Qualified home improvement products installed between January 1, 2009 and December 31, 2010 on homeowner occupied residences.

Q: How much is the tax credit?

A: Homeowners can claim a tax credit of up to $1,500 representing 30% of the purchase price (not including installation costs).

Q: How do we know the product we’re selling qualifies?

A: Get certification from your supplier. You will need this if you’re challenged.

Q: Do we have to leave a copy of the certification with a customer?

A: It is advisable, although not required to send this in with their claim when they report their taxes. They should be reminded to keep a copy for that purpose.

Q: Which products qualify?

A: All products must meet a standard specified within the Act. Windows, doors, skylights, insulation, roofing, certain types of HVAC equipment and solar products.

Q: Where can we get more information on qualified products?

A: www.ase.org, www.energystar.com, www.DOE.gov and your manufacturer.

These next two Q’s and A’s are very important to understand and remember so the prospective buyer fully understands how they get their benefit.

Q: What is a tax credit?

A: Homeowners don’t receive the tax credit when they buy the Home Improvement project. They claim the credit on their federal income tax form at the end of the year – 2009 or 2010. The credit then increases the tax refund they receive or decreases the amount they owe.

Q: What is the difference between Tax Credits vs. Tax Deductions?

A: In general, a tax credit is more valuable then a tax deduction. A tax credit reduces the tax you pay, dollar-for-dollar. Tax deductions – (home mortgages or charitable giving) – lower the taxable income. If you are in the 35-percent tax bracket, the income tax you pay is reduced by 35 percent of the amount of the tax credit.

Let’s wrap it up here for this blog post. I’ll have more Q’s & A’s in the next posting

Best regards,
Dave Yoho

Let’s Talk Energy . . . Savings!

You are probably aware that there is an energy tax credit incentive for home owners built in to the government’s massive Stimulus Bill. Let’s recap this tax credit incentive and examine how this can be a massive opportunity for home improvement retailers.

First, it’s important to understand that this is a tax credit not a tax deduction. There is an important distinction here. A tax deduction means you deduct the prescribed amount from your taxable income before determining your tax liability. A tax credit means you reduce the tax liability you owe by the amount of the tax credit. Thus, if you have a $10,000 tax liability and a $1,000 tax credit, you only owe the IRS $9,000.00. This has huge implications for home improvement retailers.

Another important aspect of this tax credit is that it increases the cap from 10% to 30% for certain home improvement expenditures (energy conservation products.)

Here is a summary of the American Recovery & Reinvestment Act of 2009. The more significant incentives provided under the new law include:

Residential Energy Property Credit – Increased to 30%

The new law increased the Code Sec. 25C residential energy property tax credits from 10 percent to 30 percent, raises the maximum cap to a $1,500 aggregate amount for 2009 and 2010 installations, eliminates the $500 lifetime cap and makes several other modifications. The changes are effective for eligible property placed in service after December 31, 2008 and before January 1, 2011.

Note: Higher energy costs should accelerate the “pay-back” period for qualifying home improvements. The credit was in effect in prior years through 2007, but Congress allowed it to lapse for 2008. Pre-2008 credits are not counted toward the new $1,500 maximum.

Note: Improvements eligible for the Code Sec. 25C credit include insulation materials, exterior windows including skylights, exterior doors, central air conditions, natural gas, propane or oil water heaters or furnaces, hot water boilers, electric heat pump water heaters, certain metal roofs, stoves and advanced mail air circulating fans.

For more detail on these tax credits check out this Energy Star link


Residential Energy Efficient Property Credit

The new law removes the individual dollar caps under the Code Sec. 25D residential energy efficient property credit for solar hot water property, geothermal heat pumps and wind energy property. However, the new law places a $500 credit cap on qualified fuel cell expenditures.

Next time, we’ll answer some of the important questions about this terrific marketing opportunity.

Best regards,
Dave Yoho

A Challenge to the Home Improvement Industry . . .

Let us prepare ourselves for what is to be!

A renowned philosopher once opined that, “in times of great change, it is the learners who have the greatest potential for success, for the learned find themselves equipped to deal only with a world that no longer exists.”

Join me, as we and others, not unlike Don Quixote, buckle on our armor and prepare to battle windmills. While we face the necessity of economic change, the windmills of doom and gloom keep turning. And as we respond to the call for ingenuity, creativity and change, while tightening our belts, the windmills, who create our laws and control the financial security of many with whom we do business, grind on . . . and on.

But, unlike Don Quixote, we have battled these forces before and won. We, the entrepreneurs, are the backbone of this $325 billion industry. We are ready to strive forward till we see the bright and shining El Dorado, which is our future.

Best regards,
Dave Yoho

The Home Improvement Industry Positively Impacts the Economy . . .

In 2007, while researching for a book I authored entitled Why. . . Buy Replacement Windows? I found that there were 22 million windows manufactured for new home construction. During the same period, there were 33 million windows manufactured for replacement installations. The majority of these replacement windows were custom manufactured – to size – and delivered within two to three weeks from the time they were measured by a window expert and purchased by the homeowner.

In most cases, within four to six weeks from the time they were sold, they were installed in the home with little or no disruption to those living in the home – and – the windows replaced were removed and disposed of without damaging the environment.

The largest percentages of these windows enabled homeowners to live with less maintenance and contributed to energy loss reduction with great savings to those homeowners. Plus, the homeowners realized a healthier lifestyle.

This is, but one example. I could cite similar studies for insulation, roofing, heating/air conditioning, siding, gutters, cabinet re-facing, bath refitting and more.

Our industry took great products that might still be on a drawing board and created ways to get viable information to homeowners through creative marketing. We researched tools and equipment to complete the installation. We offered services that ranged from financing – to cost vs. value surveys – to customer service development. All of this, arguably, lifted this fragmented industry to become a cornerstone of the American economy.

A portion of our $325 billion total is comprised of D.I.Y. – do-it-yourself projects. Yet, the actions of promoting and advertising by retailers is what created consumer awareness, which, in turn, stimulated the D.I.Y. market and still does today. And, if you marvel at the growth of the “turnstile” end of the business through companies like Lowes, Home Depot and similar, you can thank the home improvement product and service retailers. They first took great products door-to-door to develop consumer interest and the appeal for so many of the products featured in the “turnstile” home improvement store of today.

Best regards,
Dave Yoho