While it may not be as much as years past, down from $1,500 to $500, this year’s energy tax credit is still better than nothing. One benefit of the credit is that it counts for more than a deduction, as each credit is matched dollar-for-dollar with a tax liability reduction.
However, some limits do exist with the credit, including the 10% match. This means that you can earn a credit worth only 10% of the total cost. Also, the new $500 limit is for a lifetime. If you have already claimed $500 in lifetime energy credits, then your tax credit is maxed out.
Even with a lower limit, the energy credit covers several home improvements including:
o Biomass stoves
o Heating, ventilation, air conditioning
o Roofs (metal and asphalt)
o Water heaters (non-solar)
o Windows, doors, and skylights
o Storm windows and doors
The tax credit may also cover the labor on the improvement. Installations of biomass stoves, HVAC and non-solar water heater are all covered, while window and roofing installations are not.
To get the credit on your new home improvement, make sure Energy Star qualifies the improvement, keep receipts of the purchase, and include IRS Form 5695 with your taxes.
For a full list of information regarding the tax credit, please consult the IRS, your tax preparer, or a qualified expert. The preceding information is not intended to be tax guidelines.