Get Energy Tax Credit This Year

Tuesday, November 23, 2010, 6:33 AM | 9 Comments

Get energy tax credit when you weatherize your home this year. According to the Internal Revenue Service, homeowners making energy-saving improvements this fall can cut their winter heating bills and lower their 2010 tax bill as well.

Last year’s Recovery Act expanded two home energy tax credits: 1) non-business energy property credit and 2) residential energy efficient property credit.

Non-business Energy Property Credit

Here are seven things the IRS wants you to know about the Non-business Energy Property Credit:

Get Energy Tax Credit This Year

  1. This credit equals 30 percent of what a homeowner spends on eligible energy-saving improvements, up to a maximum tax credit of $1,500 for the combined 2009 and 2010 tax years.

  2. The credit applies to improvements such as adding insulation, energy-efficient exterior windows and energy-efficient heating and air conditioning systems.

    In addition, the cost of energy-efficient windows and skylights, energy-efficient doors, qualifying insulation and certain roofs also qualify for the credit, though the cost of installing these items does not count.

    The cost for energy improvements of certain high-efficiency heating and air conditioning systems, water heaters and stoves that burn biomass all qualify. This includes labor costs for installing these items.

  3. To qualify as “energy efficient” for purposes of this tax credit, products generally must meet higher standards than the standards for the credit that was available in 2007.

  4. Manufacturers must certify that their products meet new standards and they must provide a written statement to the taxpayer such as with the packaging of the product or in a printable format on the manufacturers’ Website.

  5. Qualifying improvements must be placed into service after December 31, 2008, and before January 1, 2011.

  6. The improvements must be made to the taxpayer’s principal residence located in the United States.

  7. To claim the credit, attach Form 5695, Residential Energy Credits to either the 2009 or 2010 tax return. Taxpayers must claim the credit on the tax return for the year that the improvements are made.

Residential Energy Efficient Property Credit

Homeowners going green should also check out a second tax credit designed to spur investment in alternative energy equipment. The residential energy efficient property credit equals 30 percent of what a homeowner spends on qualifying property such as solar electric systems, solar hot water heaters, geothermal heat pumps, wind turbines, and fuel cell property.

Generally, labor costs are included when figuring this credit. Also, except for fuel cell property, no cap exists on the amount of credit available. Not all energy-efficient improvements qualify for these tax credits.

Eligible Homeowners

Eligible homeowners can claim both of these credits when they file their 2010 federal income tax return. Because these are credits, not deductions, they increase a taxpayer’s refund or reduce the tax owed.

An eligible taxpayer can claim these credits, regardless of whether he or she itemizes deductions on Schedule A. Use Form 5695 for Residential Energy Credits, to figure and claim these credits.

In a Nutshell
TaxACT Free Federal and Deluxe Editions include both Schedule A and all the necessary forms you need. You can also use any of these tax software to help you do your taxes.

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