The federal government offers two different tax credits for energy-saving home improvements. The rules for one credit changed for the worse since last year. The other credit remains as generous as ever. Here’s what you need to know if you want to claim these credits this year.
Bigger Credit for More Expensive Energy-Saving Equipment
The second credit equals 30 percent of qualified expenditures to buy and install more-exotic (and expensive) energy-saving equipment for your home.
Because the expenditures for these items can be big, the credit amounts can be big too. And there are no income limits. Even billionaires can take advantage.
This second credit is available through 2016, so there is no big hurry. If your 2011 credit is so large that you cannot use it all up on this year’s return, you can carry the excess forward to 2012 and beyond.
Qualified Expenditures
The credit equals 30 percent of qualified expenditures including costs for site preparation, assembly, installation, piping, and wiring for the following gear.
• Solar water heating equipment for your U.S. residence (including a vacation home).
• Solar electricity generating equipment for your U.S. residence (including a vacation home).
• Wind energy equipment for your U.S. residence (including a vacation home).
• Geothermal heat pump equipment for your U.S. residence (including a vacation home).
• Fuel cell electricity generating equipment for your U.S. principal residence. Vacation homes do not count here. For this part of the credit, the maximum annual credit amount is limited to $500 for each .5 kilowatt hour of fuel cell capacity that you add during that year.
Special Rules
You cannot claim the credit for equipment used to heat a swimming pool or hot tub, and special rules apply to expenditures for residential co-op and condominium buildings.
Manufacturer’s Certification is Required
Again, you are required to obtain a manufacturer’s certification stating that the equipment in question qualifies for the credit. You don’t need to attach it to your Form 1040, but keep it with your tax records. A completed Form 5695 will be included with your return.
Finally, keep proof of exactly how much you spend — including any extra amounts for site preparation, assembly, installation, piping, or wiring.
Check for Additional Cash Inducements
You might also be eligible for state and local income tax benefits, subsidized state and local financing deals, and utility company rebates. These additional inducements can amount to hundreds of dollars or more.
If you have any questions regarding this newsletter or any other recent tax issues, please call us at (636) 498-1900 or (573) 756-6400
Your Professional Team
Rackers & Fernandez, LLC
