$700 Billion Bailout Benefits Garage Door Sales

© 2008 Door & Access Systems
Publish Date: Winter 2008
Author: Tom Wadsworth
Pages 38-40

$700 Billion Bailout Benefits Garage Door Sales
Energy Tax Credits Extended for 2009

By Tom Wadsworth, Editor

Are you upset about the $700 billion government bailout for the giant banks? As it turns out, the bailout bill gives incentives to homeowners to buy insulated garage doors in 2009.

This is no hoax. It’s official. Here are the facts.

The Headline Behind the Headlines

On Oct. 3, 2008, the world watched as President Bush signed into law the so-called $700 Billion Bailout Bill (H.R. 1424). At the time, though, everyone was focused on the bill’s massive Treasury fund created to purchase failing bank assets. Within a few weeks, DASMA learned that this bill included tax credits to homeowners who purchase qualifying insulated garage doors in 2009.

Here’s how the tax credits were resurrected. While the bill was being developed, Congress tacked on the Energy Improvement and Extension Act of 2008, extending the Energy Policy Act of 2005 that, among many other provisions, had applied to garage door purchases in 2006 and 2007.

DASMA Gets Confirmation

On Nov. 11, 2008, DASMA Legal Counsel Naomi Angel confirmed this news with a key contact at the Internal Revenue Service. The IRS Office for Passthroughs and Special Industries confirmed that the rules that applied to qualifying insulated garage door purchases in 2006 and 2007 now apply to purchases in 2009.

Energy Star, a joint program of the U.S. Environmental Protection Agency and the U.S. Department of Energy, has also confirmed that the bill applies to garage doors. The Energy Star Web site (www.energystar.gov) responds affirmatively to the specific question, “Are garage doors covered by the federal tax credit?”

New Details for 2009

In 2007, this magazine reported the critical details of the tax credit. Those details are identified below, along with the new information for 2009.

  • The new tax credits are available for qualifying garage door purchases “placed in service” from Jan. 1, 2009, through Dec. 31, 2009. Garage door purchases made in 2008 are not eligible for the tax credit.
  • The maximum amount that a taxpayer may claim from all of these tax credits combined is $500 over the lifetime of the tax credit (2006, 2007, and 2009).

The tax credits also apply to exterior doors, insulation, replacement windows, non-solar water heaters, and certain high efficiency heating and cooling equipment. If a taxpayer already claimed the full $500 credit in 2006-2007, no further tax credits are available. However, since the 2006-2007 tax credits were not well publicized, it’s likely that millions of Americans have not yet taken advantage of the credit.

A Big Incentive to Buy

Here’s the good news. Garage door dealers essentially have the U.S. government offering financial incentives to homeowners to buy qualifying garage doors.

Garage door dealers can offer customers a significant reason to buy qualifying insulated residential garage doors—a tax credit. Tax credits are more valuable than an equivalent tax deduction because a tax credit reduces tax dollar-for-dollar, while a deduction only decreases the amount of income that is taxed.

How to Identify an Eligible Garage Door

To be eligible for the tax credit, the purchased garage door must meet all of the following criteria:

  • The door must be an insulated residential garage door.
  • It must be installed on an insulated garage.
  • The door must have a U-factor equal to or less than 0.35, even if the door contains glazing. (See below.)
  • The door perimeter must have a means to control air infiltration.
  • The door must be expected to remain in service for at least five years.
  • The garage must be part of the taxpayer’s principal U.S. residence.
  • Dealers should provide homeowners with a Manufacturer’s Certification statement (see below) and a breakdown of the material and labor costs.

The U-Factor Factor

The U-factor of a particular garage door must be determined by testing using ANSI/DASMA 105, Test Method for Thermal Transmittance and Air Infiltration of Garage Doors. This standard is a consensus test method for determining the garage door’s U-factor (U-value).
You may be more familiar with R-values. Ask your manufacturer for details about the U-factor of the insulated doors you sell.

Calculating the Credit

A homeowner’s tax credit is based on the total material cost of the purchase (the cost of installation does not qualify). The tax credit is equal to the sum of 10 percent of all qualified energy-saving improvements installed in an existing home in the calendar years of 2006, 2007, and 2009. The maximum credit is $500.

For example, if a customer paid $2,500 in material costs for two qualified insulated garage doors, that customer would be eligible for a $250 tax credit. If the material costs were $1,000, the tax credit would be $100.

The Certification Statement

A Manufacturer’s Certification is a signed statement from the manufacturer certifying that the product or component qualifies for the tax credit. Your manufacturer must provide this statement for all insulated garage door models that meet the IRS requirements. The IRS encourages manufacturers to provide these certifications on their Web sites to facilitate identification of qualified products.

Dealers should give customers this certification statement and a breakdown of the cost of the door(s) and the cost of labor. Remind your customers that they should keep a copy of the certification statement for their records, but they do not need to submit a copy with their tax return. Contact your manufacturer for these certification statements.

Getting a Head Start

The garage door industry is much better prepared to promote the 2009 credit than it was in 2006 and 2007. The first tax credit was in effect for more than a year before the IRS confirmed that the tax credit applied to garage doors.

This news was officially confirmed on March 28, 2007, when DASMA received a letter from the IRS. In a quick effort to spread awareness, DASMA distributed hundreds of flyers two weeks later at Expo 2007 in Orlando from April 11-14, 2007.

In 2007, many garage door manufacturers were not ready to report the U-values for insulated doors. However, more than 18 months have passed since then, and many manufacturers are now routinely publishing U-values.

GarageWowNow to Boost Awareness

Besides the early start for 2009, our industry will also have the benefit of our national public relations campaign promoting the tax credits.

In 2007, the campaign was in its first year when the news broke of the 2006 and 2007 tax breaks. GarageWowNow press releases that promoted the tax credits were distributed in mid-2007, but the publishing schedule of many home magazines prevented the news from being printed until after October.

Now, with the early knowledge about the 2009 tax credits, the GarageWowNow campaign is already drafting materials to help promote them beginning in early 2009. With the benefit of widespread national exposure, you may have customers calling you and asking about the tax credits.

What To Do

To take the best advantage of this program, dealers should:

  • Identify all the residential doors you sell that qualify for the tax credit.
  • Become familiar with all eligibility criteria (above).
  • Contact your manufacturer(s) for the Manufacturer’s Certification statements.
  • Consider offering additional incentives to complement the tax breaks.
  • Prepare advertising materials (newspaper, radio, TV, Web, flyers, signage, etc.) that promote the tax credits.
  • Get started now!

Your manufacturer may be preparing materials for you. Your sales representative should have details of available programs.

A Chance of a Lifetime

The tax credit essentially gives the homeowner a 10 percent savings off the material cost of the door. If you offer additional incentives, the savings could be even more attractive.

This kind of opportunity may never happen again in your lifetime. How often has the government helped you sell garage doors? If you play your cards right, your tax credit promotion can help boost sagging sales in a down economy and beat your competitors to the punch.

More Information on the Web

Text of HR 1424

About the Manufacturer’s Certification Statement

Energy Star’s Comments About the Tax Credit

Energy Star’s Comments About Exterior (Entry) Doors http://www.energystar.gov/index.cfm?c=windows_doors.pr_taxcredits

Energy Star’s Comments About Garage Doors