How to Claim Your Energy Tax Credits

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Energy tax credits on select improvements available through end of 2013.
Published: January 23, 2012
By: Donna Fuscaldo

The feds have resurrected, through 2013, $500 tax credits for energy-efficient home improvements. If you upgraded one or more of the following systems, you may be eligible to take a tax credit on your return.

Biomass stoves
Heating, ventilation, air conditioning
Insulation
Roofs (metal and asphalt)
Water heaters (non-solar)
Windows, doors, and skylights
Storm windows and doors

The energy tax credits are small, but at least a credit is better than a deduction:
Deductions just reduce your taxable income.

With a credit, you get a dollar-for-dollar reduction in your tax liability: If you get the $500 credit, you pay $500 less in taxes.

Limits on IRS energy tax credits besides $500 max
Credit only extends to 10% of the cost (not the 30% of yesteryear), so you have to spend $5,000 to get $500.

$500 is a lifetime limit. If you pocketed $500 or more in 2009, 2010, and 2011 combined, you’re not entitled to any more money for energy-efficient improvements in the above seven categories. But if you took $300 back then, for example, you can get up to $200 in 2012.
With some systems, your cap is even lower than $500.

No matter how much you spend on some approved items, you’ll never get the $500 credit — though you could combine some of these:

System New windows $200 max (and no, not per window—overall)

Advanced main air-circulating fan $50 max

Qualified natural gas, propane, or oil furnace or hot water boiler $150 max

Approved electric and geothermal heat pumps; central air-conditioning systems; and natural gas, propane, or oil water heaters $300 max

And not all products are created equal in the feds’ eyes. Improvements have to meet IRS energy-efficiency standards to qualify for the tax credit. In the case of boilers and furnaces, they have to meet the 95 AFUE standard. EnergyStar.gov has the details.

Tax credits cover installation — sometimes

Rule of thumb: If installation is either particularly difficult or critical to safe functioning, the credit will cover labor. Otherwise, not. (Yes, you’d have to be pretty handy to install your own windows and roof, but the feds put these squarely in the “not covered” category.)

Installation covered for:
Biomass stoves
HVAC

Non-solar water heaters

Installation not covered for:
Insulation
Roofs
Windows, doors, and skylights

How to claim the energy tax credit
Determine if the system you installed is eligible for the credits. Go to Energy Star’s website for detailed descriptions of what’s covered; then talk to your vendor. The site may not have been updated by the Department of Energy.
Save system receipts and manufacturer certifications. You’ll need them if the IRS asks for proof.

File IRS Form 5695 with the rest of your tax forms in 2012.

This article provides general information about tax laws and consequences, but isn’t intended to be relied upon as tax or legal advice applicable to particular transactions or circumstances. Consult a tax professional for such advice, and remember that tax laws may vary by jurisdiction.

Donna Fuscaldo has written about personal finance for more than decade for Dow Jones Newswires, the Wall Street Journal, and Fox Business News. She’s currently a freelance writer with her own home office.

INFORMATION COURTESY OF
houselogic
Read more: http://www.houselogic.com/home-advice/tax-credits/how-to-collect-tax-energy-credits/#ixzz2kfdpwsmu

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