Important Energy Tax Credits

In an effort to lower the carbon footprints of homeowners, the federal government is offering tax credits for energy efficient items covering a number of categories. Unlike deductions, these dollar-for-dollar credits can significantly reduce your tax bill if you qualify. If you operate your small business out of your home, this could save you some hard earned money.

The available federal energy tax credit falls into two main categories. Here is a detailed description of what may qualify you for a credit in each category:

Non-Business Energy Property Credit: This credit is for 10% of the cost of qualified items up to a $500 lifetime maximum. It only applies to an existing home that is your principal residence, meaning that if this was for a rental property or new construction, you do not qualify. This credit covers several categories of home improvements, including:

  • Insulation
  • HVAC Equipment
  • Asphalt & Metal Roofing
  • Windows/Doors
  • Water Heaters
  • Biomass Stoves

Additional restrictions may apply and not all energy-efficient upgrades qualify. So as always, check with your accountant to see if you are eligible to claim this credit.

Residential Energy Efficient Property Credit: The Residential Energy Efficient Property credit is far more ‘liberal’ than the Non-Business Energy Property credit. It allows you to claim up to 30% of the cost of alternative energy equipment you put into your home. In addition, you can claim the credit even if this was your second home or a new construction. Rental properties still do not qualify.

The dollar amount you are allowed to claim with this credit is limitless. If it exceeds your tax bill, you are allowed to carry the remainder forward to the following year. This credit is in effect until the 2016 tax year, so you can still get in on it if you have not already. Home improvements covered include:

  • Solar Panels & Solar Water Heaters
  • Wind Turbines
  • Geothermal Heating/Cooling Systems
  • Fuel Cells ($500 maximum and second homes do not qualify)

If you installed any of the aforementioned energy efficient upgrades last year, be sure you do not miss claiming your credit. If you are not sure if you qualify, speak to a tax professional about your particular circumstance.

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