Tuesday, January 6, 2015

Tax Credits: A Gift from Congress

Tax Break Rewards Homeowners Who Make Home Energy Improvements


If you installed energy-efficient home improvements in 2014, you may be eligible for a $500 tax credit. Among the home improvements that might qualify for the tax credit:
  • Doors
  • Windows
  • Insulation
  • HVAC systems
  • Water Heaters
  • Roofs
  • Skylights
  • Biomass stoves
Tax credits are valuable because they offset the tax you owe, dollar for dollar. For example, if you owed $10,000 in taxes, a $500 tax credit would reduce what you owe to $9,500.
The Residential Energy Tax Credit had expired at the end of 2013, but just last week, Congress renewed it through 2014. That means you may be able to claim the tax credit when you file your 2014 federal taxes. Congress did not extend the tax credit through 2015.
Warning: It may take a while for the IRS to update its website with information about the renewal, and to post a 2014 version of Form 5695, which you’ll use to claim the credit.
Check the Energy Star website to see if the specific energy-efficiency home improvements you made qualify for the credit. Give that site a few weeks to get updated with the latest information, as well.
The Fine Print
In general, you’ll get a 10 percent tax credit for installing energy-efficiency improvements. But, your tax credit is capped for some items. For example, you can’t claim more than $200 for windows, and a new air conditioner will earn you no more than a $300 tax credit.
There’s also a lifetime cap of $500, so if you took the tax credit in prior years, you have to subtract the credit you claimed from $500. For example, if you took $400 in 2013, you can only take the remaining $100 in 2014.
The cost to install your energy-efficiency improvements may, or may not, be included. For example, window installation is included, but insulation installation is not.
This tax credit applies only to your main principal residence.
Where To Get More Info
Houselogic.com has excellent information about taking the tax credit for these items:

Image source: Owens Corning

courtesy of Albert Clark's HomeAction Newsletter
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