You may have heard that tax credits for energy-saving repairs to homes are disappearing from income tax returns.
It’s true. Some credits are fading away. But, if you’re working on your 2011 taxes, don’t throw away those repair receipts yet!
HOME ENERGY IMPROVEMENTS
The Internal Revenue Service still offers credits of as much as 10 percent for adding insulation, replacing leaky windows or sealing a drafty roof. That’s not as lucrative as in prior years, but it’s still delivers a direct chop off your tax bill.
Here’s what you need to know:
- The maximum credit available for 2011 is $500. However, that maximum also is a lifetime credit. If you claimed improvements for energy efficiency in past returns, those credits reduce the $500 on this year’s 1040. (There’s also a maximum of $200 for windows.)
- The credit applies to costs of materials – not to labor charges for installing them.
- The improvements must go into a principal residence, not a vacation or second home.
Taxpayers also can claim a 10 percent tax credit for installing what the IRS calls “residential energy property.” These are high-efficiency heating or cooling systems, including furnaces or air conditioning systems water heaters and even some stoves that burn biomass fuels such as wood. The IRS is more generous with this tax credit than with home improvements above; the credit applies to both equipment and the labor charges for the installation.
SAVING GREEN BY GOING GREEN
The greatest of the 2011’s tax credits goes to the greenest projects — alternative energy. Taxpayers can capture a tax credit of 30 percent of total cost for installing solar panels, wind turbines, fuel cells or geothermal systems.
It’s called the Residential Energy Efficient Property Credit. The costs of these projects typically are well into thousands of dollars, so a dollar-for-dollar tax credit can be quite an incentive. In general, labor costs are included in the credit. In addition, there is no IRS limit, except in the case of fuel cells.
However, there are some details to claiming it. With the big reward, taxpayers will want to make sure they have a manufacturer’s tax credit certification, which should come with the installation. Not all systems qualify, the IRS says.
EricJohn Ltd. can guide you through the ins and outs of energy tax credits. They require a special IRS form. Contact us for the guidance and the proof you need to tap energy efficiency credits on your 2011 return!!