Can I Claim An Energy Efficient Tax Credit?

During the tax season, you often start to think of all the different ways that you can lower your taxable income, whether its tax credits or deductions. But that fact is, most of the time if you wait until you do your taxes to think about saving any money then it is too late. For example, the time to think about a 2012 energy efficient tax credit is now. You need to be sure you buy the appliance or do the work this year so that you can apply for the credit next year. I think is really a good program because basically the government is paying you to do something smart for yourself. Any investments you make in saving energy will pay for themselves over the years as energy costs are bound to continue to go up and up. Thus, the IRS is paying you to actually save money. It can’t get any better than that.
The energy efficient tax credit is a great way to lower your taxable income, while improving your home. Now many people are under the impression that qualifying for a tax credit for energy efficient appliances or upgrades is hard, but that is not the case. Qualifying for the energy efficient tax credit simply involves following the rules set forth by the Internal Revenue Service. The hardest part about qualifying for this tax credit is understanding the terms that the Internal Revenue Service uses to explain the rules that must be followed.
This article is just a short primer on some of the highlights from these federal energy tax credit programs. It is just meant to interest you into looking into them further with your tax professional. I am not a tax accountant and I am not offering any tax advice. Hopefully, this post will get you interested in finding out more about these programs by talking to an expert. So read through this and then if you are interested in more information you can research it further. This is just meant to give you some general ideas. Any tax credit may or may not be good for any particular person.

Do I Qualify For The Energy Efficient Tax Credit?
One of the best things about tax credits for energy efficiency is how many there are to choose from, most homeowners are bound to qualify for at least one of them, but you must pay attention to the details. In order to qualify for any energy tax credit you must have purchased and installed the item in the same year you are claiming it. For example, you cannot purchase an appliance in 2010 and claim it in 2011. You also must have purchased the goods or service with the intention of using it for a minimum of five years. Obviously, you will keep any new roof for more than five years so this applies mainly to products such as air conditioning units and appliances.

Claiming The Tax Credit
If you plan to make home improvements, you will want to ensure that you save all of your receipts for any work done. You will also need to keep the Manufacturer Certification Statement for your records. You want to keep these records just in case the IRS decides to audit you, always have proof of any tax credits you claim.

Tax credits are nonrefundable, which means they are not going to increase the amount of your tax return above your actual tax amount. All a federal tax credit for consumers can do is lower the amount of your tax liability. For example, you owe the IRS $256 in taxes, you have a tax credit for $300, and you will only be able to claim up to $256, so you will not owe any taxes. The extra $46 cannot be claimed. Something else to note is that tax credits can only be claimed once; you cannot carry over any money to the next year or apply it back to previous years. A $500 limit is effect for any federal tax credit that expires in December 2011, which means that taxpayers who have already claimed $500 or more on the same credits between 2006 and 2010 can no longer claim these credits despite any improvements they have made. However, the tax credits that expire in 2016 are not included.

To obtain the correct form you can visit the IRS website or you can obtain one from any company that prepares your taxes. Most homeowners will find that they need IRS Form 5695 for renewable and efficiency credits.

Federal Tax Credits Through 2011

Biomass Stoves – These stoves are used to burn biomass fuel in order to heat your home or your water. The fuel used to power these include agricultural crops, wood, wood resides, plants, grasses, and fibers to name a few. This credit is available until December 31, 2011. To qualify the biomass stove must be rated at 75% thermal efficiency, unlike many other improvements, the installation costs can also be included in the credit.
HVAC – In order to qualify for this tax credit you might need to change both your heating and cooling system. Central Air Conditioners and Electric Heat Pumps qualify for a $300 tax credit, furnaces and broilers qualify for a $150 tax credit, and an advanced main circulating fan can qualify for a $50 credit. However, there are certain requirements that must be met fin order for each product to qualify. Just because a product is an ENERGY STAR product that does not mean that they qualify for the tax credit. Installation can be included in the tax credit. For requirements that are more detailed you can visit the IRS website.
Insulation – Having insulation blown into your walls and attic can give you a tax credit of up to $500. However, you can only claim 10% of the cost. In order to claim the credit the primary roll of the insulation must be to insulate, insulated siding would not qualify for the tax credit. This credit does not include the cost of installation or labor; it is limited strictly to the materials.
Roofing – This credit covers any roofing material that is ENERGY STAR qualified, but they must be metal or reflective asphalt shingles that are designed to reduce the amount of heat your home absorbs from the sun. This credit applies to materials only and is for 10% of the cost, but cannot exceed $500.
Non-Solar Water Heaters – Gas, Oil, and Propane water heaters qualify for this credit as long as they have a thermal efficiency rating of 90%. Electric Heat Pump Water Heaters also qualify if they have an energy factor greater than or equal to 2.0. Installation is included in this credit of $300.
Windows, Doors, and Skylights – Anything added to your house in terms of doors, skylights and windows must be ENERGY STAR labeled in order to qualify for the energy efficient tax credit. Windows have a maximum credit of $200, but the total credit adding doors and a skylight cannot exceed $500. The credit is 10% of the cost of the windows, doors, and skylights themselves, installation is not included.

Tax Credits Through 2016

Geothermal Heat Pump – To qualify for this credit the geothermal heat pump must be installed by December 31, 2016. The heat pump must meet specific requirements based on the type of geothermal heat pump it is, this information can be found on the IRS website in detail. The total credit is 30% of the cost, which also includes installation.
Solar Energy Systems – If you plan to install Solar Water Heating Property to qualify for this credit the system has to be certified by Solar Rating and Certification Corporation. In addition, half of the energy being generated by the system has to come from the sun. With this system, the tax credit only applies to the solar water heating system property not the entire water heating system. If you plan to use Photovoltaic Systems in order to qualify they have to meet the code requirements for both fire and electrical and they must provide electricity for your entire residence. Both these systems qualify for a tax credit of 30% of the cost and installation is included.
Wind Energy Systems – Residential Small Wind Turbines that do not have a nameplate capacity of more than 100 kilowatts qualify. This credit is 30% of the cost of the unit, which also includes installation costs.
Fuel Cells – In order for Residential Fuel Cell Systems to qualify they must be have a 30% efficiency rating or higher, but they also have to have a 0.5 kilowatt capacity. The 30% of cost credit also includes installation.

As you can see there are a lot of different ways to take advantage of tax savings for energy efficient projects. You next step, after seeing some of the potential programs, is to get more information on your particular situation. This article is not offering tax advice to anyone, it was only meant as an eye opener that will hopefully get you more interested. Good luck and happy tax crediting.

Leave a Reply

Welcome to My Site

Are you looking for up to date information on Garages, Floors, and Coatings? If so, this is the place you need to be.

This site came about one day because I was looking for the Best Floor Coating to install in my garage. I just couldn’t find any good information that would help me to make a decision.

I was complaining about the lack of a good site and so I decided to just do it my self. This is the result. A place where you can get unbiased answers and ask questions. I hope you find it useful.

Recently Commented

  • Andy: Hi Leonard, I would recommend an acrylic latex or latex enamel wood floor paint. Be sure your floor is...
  • Leonard Pomaranski: Andy, What would you used on a wood front porch w.hich is painted and chipping off????? I heard...
  • Matt: There are a variety of natural green cleaning solutions. It is hard to stay eco friendly from the carton to the...
  • evolution-virag.com: Better if you choose a NOT rainy day to install garage floor protector…
  • Andy: Hi Mitzi, thanks for the question. I would say you may be happy with a clear epoxy coating over the top. One of...