Twin trends in 2009 combined to create interest among Americans in improving their homes to increase energy efficiency: an increasing concern about saving money and a renewed interest in environmentally-friendly practices. The following tax tips can help homeowners take advantage of federal tax credits, which are just one more incentive for consumers to improve their homes.
Consumers who have already made some home improvements which added to their home's energy efficiency may qualify for the residential energy tax credit. The tax credit of up to $1,500 can be claimed on your 2009 taxes if the projects were completed last year. If you are contemplating making some energy efficient changes in 2010, you can claim them on your 2010 tax return.
However, there are some caveats to the energy tax credit: only certain projects qualify. In addition, the tax credit is capped at 30% of the cost - up to $1,500, so if you spend less, you may not get the full $1,500 credit.
In order to qualify, the improvements must meet IRS energy-efficiency standards. Make sure you keep all your receipts and manufacturers' written materials which should tell you if they meet the IRS standard.
While less glamorous than some other home improvements, green builders say the best thing you can do to up your home's energy efficiency is to add insulation.
Other potentially qualifying projects include replacing your windows, replacing your heating and air conditioning system, repairing your roof and replacing your water heater.
Bigger energy efficient projects are not capped at all, such as adding solar panels, solar water heaters, wind turbines and geothermal heat pumps. For those projects, you can deduct 30% of the entire project cost.
Homeowners who opt for both a smaller project and a bigger one can claim both credits and can make a separate claim for each of those bigger projects.
However, the $1,500 cap on the smaller projects tax credit applies to both 2009 and 2010. In other words, you can't take it in 2009 for your windows and then again in 2010 for your new heat pump. Since the credit is limited to 30% of a project and capped at $1,500, that means as soon as you have spent $5,000 you have reached your maximum.
Just because you may have reached the maximum tax credit doesn't mean you shouldn't continue with energy efficient improvements. The savings on your utility bills will continue along with the beneficial effects on the environment.
Written by Michele Lerner
HULIQ.com
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