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Energy Efficient Tax Credits

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Who gets to claim it?

Individuals who install energy-efficient home improvements in their primary residences, which they own, can claim an energy tax credit.

What energy-efficient home improvements are eligible?

An image of an energy efficiency houseThe overall $500 cap can be reached in several ways with the purchase and installation of energy-efficient products that meet efficiency criteria:

  • Exterior windows: Includes skylights and storm windows.
  • Insulation, exterior doors or roofs: Includes seals to limit air infiltration, such as caulk,
  • weather stripping and foam sealants, as well as storm doors.
  • Central air conditioner, heat pump, furnace, boiler, water heater or biomass (e.g. corn) stove. A separate credit applies for geothermal heatpump systems.

In addition, to be eligible for the federal tax credits:

Windows, doors, insulation and roofs must be expected to last at least five years (a two-year warranty is sufficient to demonstrate this). Manufacturers can certify (in packaging or on the company’s website) which of their products qualify for the tax credit.

Retailers, contractors and manufacturers should be able to help you determine what levels of insulation and what other products qualify. All the improvements must be installed in or on the taxpayer’s principal residence in the United States. Condo and co-op improvements are apportioned to the owners proportionally

How much is the credit?

The tax credit amount is now 10 percent of the cost of building envelope improvements, excluding labor costs and limited to $200 for windows, and specific dollar limits for heating and cooling equipment.

There is a cap on the credit amount of $500 for fiscal years 2006 through 2013 combined; if you have ever claimed this credit in the past, it counts against the $500 limit (but does not affect the $1500 limit available for 2009 and 2010).

What do I need to do to get the tax credit?

You will need to file IRS Form 5695 with your taxes. However, tax forms reflecting the tax credit extensions under the American Tax Payer Relief Act of 2012 are yet to be released.

In addition, you will need to keep at least receipts proving that you purchased the improvements and a copy of the manufacturer’s certification. TurboTax Online should also be able to provide proper forms and guidance.

The U.S. Congress authorized the energy tax credits to get people to use alternative energy sources to promote a cleaner, healthier place for all of us.

By taking advantage of the energy tax credits you will save money on your utility bill, lower your tax owed, and live in a better place. Tax credits reduce your tax bill dollar for dollar and a tax deduction only reduces a percentage of the amount of income that is subject to tax.

How to Claim the Credit

There are 2 ways you can claim your tax credits:

  1. Download your tax return forms, and fill them out by hand.
  2. Have TurboTax do all the work for you and make sure you get the full energy tax credit you are entitled to.

Doing tax returns with pen and paper is quickly becoming a thing of the past. Get up to speed and start filing online with TurboTax to claim your energy tax credits.