Improve Energy Efficiency and Claim Credits
There’s still time to make your home more energy efficient and qualify for a tax credit on your 2013 federal income tax return. A tax credit reduces your tax bill dollar for dollar. Use IRS Form 5695, Residential Energy Credits, to claim yours.
There are currently two separate home energy credits that you need to know about.
Non-Business Energy Property Credit
You may claim a credit of 10 percent of the cost of certain energy saving “property” that you added to your main home. This includes the cost of qualified insulation, windows, doors and roofs.
Keep in mind that this $500 credit applies to cumulative claims for the credit dating back to 2006. The energy efficient home improvement credits started in 2006, expired for 2008, were enhanced for 2009 and 2010, then largely returned to their original form for 2011; the 2011 version is the credit that was extended for 2012 and 2013, when it is set to expire.
This credit is for 10 percent of the cost of the building materials (labor excluded) for insulation, exterior windows and doors that meet Energy Star requirements, and roofs (metal roofs with pigmented coating, or asphalt roofs with cooling granules). So if the cost is $5,000, you get the full $500 credit, except for windows, which have a sublimit of $200. Also eligible towards the $500 maximum credit are: central air conditioners ($300), heat pumps ($300), furnaces ($150) and even corn-fueled stoves ($300).
Remember, if you’ve taken a credit for $500 (or $1,500 in 2009 or 2010 when the stimulus values were higher), you’re officially tapped out. However, if you took only a portion, say $200 for windows, then you still have $300 left.
Residential Energy Efficient Property Credit
This tax credit is 30 percent of the cost of alternative energy equipment that you installed on or in your home.
Qualified equipment includes solar hot water heaters, solar electric equipment and wind turbines.
There is no limit on the amount of credit available for most types of property. If your credit is more than the tax you owe, you can carry forward the unused portion of this credit to next year’s tax return.
You can install qualifying equipment in connection with any home you own located in the United States. It does not have to be your main home.
This credit is available through 2016.
According to the latest data released by the IRS, more than $26 billion of qualified improvements were made in 2010 in connection with the Non-Business Energy Property Credit. These expenditures resulted in more than $5.4 billion in tax credits for just fewer than 7 million homeowners. The most popular investments were energy efficient windows followed by energy efficient natural gas, propane and oil powered water heaters and furnaces.
In total, there were $2.67 billion of qualified power production investments yielding about $800 million in Residential Energy Efficient Property Credits in 2010. More than 100,000 taxpayers installed solar panels followed by nearly 73,000 homeowners with new geothermal heat pumps.