Taxpayers who install certain energy-efficient home improvements can cut their energy bills. But they can also cut their tax bills as well. Here are some enlightening facts about home energy tax credits that can help ensure their next income tax return is in the comfort zone.
Non-Business Energy Property Credit
Part of this credit is worth 10 percent of the cost of certain qualified energy-saving items added to the taxpayer’s main home during the past year. This could include insulation, windows, doors and roofs.
The other part of the credit is not a percentage of the cost, but for the actual cost of certain property. This portion can include items such as water heaters, and heating air conditioning systems. The dollar limit will vary with each type of property claimed.
The credit has a maximum lifetime limit of $500, however only $200 of that total can be claimed for windows. Be sure the taxpayer has the written certification from the manufacturer that the product qualifies for the tax credit. It can be found posted on the manufacturer’s website or included in the product packaging. It should not be included with the return, but retained with the taxpayer’s records.
Remember that this tax credit applies only to homes located in the United States, and any improvement being claimed must be put into service by Dec. 31, 2016.
Residential Energy-Efficient Property Credit
This credit covers 30 percent of the cost of alternative energy equipment installed on or in the taxpayer’s home. Qualified equipment includes solar water heaters, solar electrical equipment, wind turbines and fuel cell property.
Wind turbine and fuel cell property must be placed into service by Dec. 31, 2016 to qualify. Solar water heaters and other solar electric equipment must be in service by Dec. 31, 2021.
Like the previous credit, the home must be located in the U.S. to qualify for this tax credit. However, it does not have to be the taxpayer’s main home – unless the equipment being claimed is qualified fuel cell property.
The tax credit for qualified fuel cell property is limited to $500 for each one-half kilowatt of capacity. The amount for other qualified expenditures doesn’t have a limit. If the credit is more than the taxpayer owes, the unused portion of the credit can be carried forward to the next year’s tax return.