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Money in
Your Pocket
IR-2009-98, Oct. 29, 2009
WASHINGTON -- People can now weatherize their homes and be rewarded for their
efforts. According to the Internal Revenue Service, homeowners making
energy-saving improvements this fall can cut their winter heating bills and
lower their 2009 tax bill as well.
The American Recovery and Reinvestment Act (Recovery Act), enacted earlier
this year, expanded two home energy tax credits: the nonbusiness energy property
credit and the residential energy efficient property credit.
Nonbusiness Energy Property Credit
This credit equals 30 percent of what a homeowner spends on eligible
energy-saving improvements, up to a maximum tax credit of $1,500 for the
combined 2009 and 2010 tax years. The cost of certain high-efficiency heating
and air conditioning systems, water heaters and stoves that burn biomass all
qualify, along with labor costs for installing these items. In addition, the
cost of energy-efficient windows and skylights, energy-efficient doors,
qualifying insulation and certain roofs also qualify for the credit, though the
cost of installing these items does not count.
By spending as little as $5,000 before the end of the year on eligible
energy-saving improvements, a homeowner can save as much as $1,500 on his or her
2009 federal income tax return. Due to limits based on tax liability, other
credits claimed by a particular taxpayer and other factors, actual tax savings
will vary. These tax savings are on top of any energy savings that may
result.
Residential Energy Efficient Property Credit
Homeowners going green should also check out a second tax credit designed to
spur investment in alternative energy equipment. The residential energy
efficient property credit, equals 30 percent of what a homeowner spends on
qualifying property such as solar electric systems, solar hot water heaters,
geothermal heat pumps, wind turbines, and fuel cell property. Generally, labor
costs are included when calculating this credit. Also, no cap exists on the
amount of credit available except in the case of fuel cell property.
Not all energy-efficient improvements qualify for these tax credits. For that
reason, homeowners should check the manufacturer’s tax credit certification
statement before purchasing or installing any of these improvements. The
certification statement can usually be found on the manufacturer’s website or
with the product packaging. Normally, a homeowner can rely on this
certification. The IRS cautions that the manufacturer’s certification is
different from the Department of Energy’s Energy Star label, and not all Energy
Star labeled products qualify for the tax credits.
Eligible homeowners can claim both of these credits when they file their 2009
federal income tax return. Because these are credits, not deductions, they
increase a taxpayer’s refund or reduce the tax he or she owes. An eligible
taxpayer can claim these credits, regardless of whether he or she itemizes
deductions on Schedule A. Use Form 5695, Residential Energy Credits, to figure
and claim these credits. A draft
version of this form is available now on IRS.gov.
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