It’s never too late to make some needed improvements to boost the efficiency of your home’s energy usage. For tax purposes, making a few around-the-house upgrades before the end of the year can contribute to a larger tax refund.
Not only will you be more energy resourceful, but you will save money in the long term, and the IRS will recognize these efforts by rolling out some energy credits to assist you with the costs.
There are two main types of credits available. The most common credit is money that you can get back for conventional home usage improvements, such as energy efficient windows and doors. The second type of credit targets alternative energy investments, such as solar or wind powered additions.
Here is a breakdown of the credits that you can take advantage of:
• Any insulation material or system that is specifically designed to reduce heat loss or heat gain in a home. Blanket insulation, rigid foam, loose fill and spray foam insulation all qualify as long as they meet the minimum standards of the International Energy Conservation Code.
• Exterior windows, including certain storm windows and skylights, as well as exterior doors and even some storm doors. Look for the Energy Star label or check with the salesperson to make sure your door or window qualifies. Caulking and weather stripping around doors and windows does not apply.
• Any metal or asphalt roof that is appropriately designed to reduce the heat gain or heat loss of your home. The roof must meet or exceed the Energy Star program requirements in effect at the time of purchase or installation.
• Energy efficient appliances, such as electric heat pumps and electric water heaters, central air conditioners, natural gas, propane or oil water heaters & furnaces, stoves that use biomass fuel, as well as certain advanced main air circulating fans used in natural gas, propane, or oil furnaces.
For the above appliances, you are entitled to take up to 30% of the cost for the material, but not the installation. Contractor costs are not included in the tax credit so be sure that your bill shows an itemized breakdown of the material costs separate from any installation costs.
The amount of credit you can take is subject to a combined $1,500 ceiling for tax years 2009 and 2010. This means that if you took advantage of this credit on your 2009 tax return, then you may have to reduce any credit claimed on this year’s return that exceeds the $1,500 threshold.
In addition to the above conventional improvements, you can also deduct large alternative energy products such as solar electric and solar water heating property costs, wind energy turbines, geothermal heat pumps, and fuel cell stack assemblies. For these items, a homeowner can take 30% of both the cost and the installation. There is a dollar limit based on the kilowatt usage of the fuel cells, but other than that, there is no ceiling on the amount of credit you can take.
For purposes of claiming the credit, even if you do not physically make full-payment by December 31st, costs are treated as being paid when the original installation of the item is completed, or in the case of costs connected with the construction or reconstruction of your home, when your original use of the constructed or reconstructed home begins.
Time is running short but you can still take advantage of many of these energy efficient, home improvement tax credits!
For more information, see the instructions associated with IRS Form 5695, Residential Energy Credits [PDF].