Jackson Hewitt(R) Reminds Taxpayers That Home Improvement Expenditures This Year Could Mean Tax Credits When Filing a Tax Return

PARSIPPANY, N.J., Sept. 7 /PRNewswire/ -- As the lazy days of summer draw to a close, Jackson Hewitt Tax Service(R), an industry leader providing full service individual federal and state income tax preparation, reminds homeowners that renovations, especially those that improve a home's energy- efficiency, may provide tax deductions and special energy credits. Knowing which renovations provide tax benefits, and how to classify and claim these benefits, may allow taxpayers to realize extra value from their homes when filing their individual income taxes.

"Home-related expenses typically allow taxpayers to itemize a host of deductions annually, as well as enjoy other tax benefits," comments Mark Steber, Vice President, Tax Resources of Jackson Hewitt Tax Service. "However, homeowners should be aware that the IRS will not consider renovations a true 'improvement' -- rather than just general repair or maintenance -- unless they increase the value of the residence and add to its cost basis. Examples of qualified improvements might include adding new vinyl siding or installing a security system, as well as making energy-friendly modifications."

Tax Credits for Going Green

Those considering making energy-focused improvements to their homes may benefit from an important new option this coming tax season. The Energy Tax Incentives Act of 2005, now in its first active year, allows those making certain types of home improvements to claim beneficial credits on their tax return. While owners of multi-family units, single family homes, condominiums, co-ops and townhouses are all eligible, tax credits must relate to improvements made to a primary home within the U.S. between January 1, 2006 and December 31, 2007.

Tax credits under the new Energy Tax Incentives Act vary based on the type of improvement made and include the following:

* Adding insulation, skylights, exterior doors and windows, and installing metal roofs with cost-efficient coatings offer a credit of 10 percent of the amount spent on improvements, up to a lifetime total amount of $500. Windows are further limited to a maximum $200 credit. * Heat pumps, central air conditioners, circulating fans, furnaces and hot water heaters may qualify but are not subject to the 10 percent limit. These carry their own individual Dollar restrictions. * Installing solar water heating systems, solar panels and fuel cell power plants are included. For example, taxpayers can claim a credit equal to 30 percent of the qualified investment in a solar panel (up to a maximum credit of $2,000) and another equivalent credit for investing in a solar water heating system. * Solar instruments used to heat a spa, hot tub or swimming pool do not qualify. Improvements Now Reap Benefits Down the Road

While some improvements have immediate tax implications, others come into play when it's time to sell a home. Modifications like adding new vinyl siding or installing a security system may increase the value of a home, adding to its cost basis. When the home is sold, the increased basis provides a smaller gain on the sale of the home, thereby potentially lightening one's tax burden. Although this type of benefit is realized in the future, taxpayers can realize tax advantages now if they have a loan secured by their home to pay for the improvements.

The interest on second mortgages, home equity lines of credit and home equity loans is deductible in the year the interest is paid. Taxpayers who use part of the refinanced mortgage money to pay for renovations to the home, and meet certain other requirements, may generally deduct the points associated with the home improvements in the year paid, spreading out the rest of the points over the life of the loan.

"Taxpayers who use a home equity line of credit to make home-related improvements can take a tax deduction equal to the interest that has been paid," comments Steber. "In addition, homeowners that itemize can also deduct any property taxes they have paid. In short, there are many tax deductions that can help lower taxes for people who own homes, putting extra money in their pocket, provided they know where to look."

For additional information on the kinds of home improvements that merit tax credits, or to understand how financing a home renovation impacts a tax return, contact a tax preparer at a local Jackson Hewitt office. Visit http://www.jacksonhewitt.com/ or call 1-800-234-1040 for locations.

About Jackson Hewitt Tax Service Inc.

Jackson Hewitt Tax Service Inc. , with over 6,000 franchised and company-owned offices throughout the United States during the 2006 tax season, is an industry leader providing full service individual federal and state income tax preparation. Most offices are independently owned and operated. The Company is based in Parsippany, New Jersey. More information may be obtained at http://www.jacksonhewitt.com/. To locate the Jackson Hewitt Tax Service office nearest to you, call 1-800-234-1040.

Contact: Allison Jackson Melissa Connerton Senior Manager, Communications CooperKatz & Company Jackson Hewitt Tax Service Inc. 212-455-8001 973-630-0681 mconnerton@cooperkatz.com allison.jackson@jtax.com