Tax credits are best. They reduce your taxes dollar for dollar. This credit is called a “nonrefundable credit,” which means that you need to have taxes due for the credit to pay off for you.

Example. Your taxes due before this credit is $1,000. You qualify for a credit of $1,500. You may offset the $1,000 of taxes due, but the government is not going to give you more then that. Thus you benefit by $1,000. For purposes of this credit, consider making $5,000 in improvements to your main home because that yields a tax credit of $1,500. The new credit is expansive and can apply to qualifying

1. windows and doors,

2. insulation,

3. roofs (metal and asphalt),

4. HVAC,

5. nonsolar water heaters, and

6. biomass stoves.

The requirements for qualification appear below, within each qualifying category.

Homeowners in cooperative housing corporations and in condominiums may claim their proportionate share of qualifying expenditures made by the cooperative or condominium.

Article is from Tax-Smart Solutions for the Self-Employed Tax Reduction Letter April 2009, Volume 18 Number 4