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Friday, January 27, 2012
Question: Good Morning, Mr. Estep
I'm preparing for our tax meeting and wanted to know, if there are any tax credits or deductions available
this year for energy efficiency improvements? We replaced 8 windows in
our home, bought an Energy Star refrigerator and had additional insulation
installed in our attic as well as having the basement sealed with foam
insulation. All together we spent approximately $9k.
Answer: Great question. Here is some excellent guidance right from the IRS web site.
Home Energy Credits Still Available for 2011
Special Edition Tax Tip 2011-08, November 21, 2011
The IRS reminds
homeowners that they still have time this year to make energy-saving and
green-energy home improvements and qualify for either of two home energy
The Nonbusiness Energy Property Credit is aimed at homeowners installing
energy efficient improvements such as insulation, new windows and furnaces. The
credit is more limited than in the past years, but can still provide substantial
The 2011 credit rate is 10 percent of the cost of qualified energy
efficiency improvements. Energy efficiency improvements include adding
insulation, energy-efficient exterior windows and doors and certain roofs. The
cost of installing these items does not count.
The credit can also be claimed for the cost of residential energy property,
including labor costs for installation. Residential energy property includes
certain high-efficiency heating and air conditioning systems, water heaters and
stoves that burn biomass fuel.
The credit has a lifetime limit of $500, of which only $200 may be used for
windows. If the total of nonbusiness energy property credits taken in prior
years since 2005 is more than $500, the credit may not be claimed in
Qualifying improvements must be placed into service to the taxpayer’s
principal residence located in the United States before January 1, 2012.
Homeowners going green should also check out the Residential Energy Efficient
Property Credit, designed to spur investment in alternative energy
The 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.
No cap exists on the amount of credit available except for fuel cell
Generally, labor costs are included when figuring this credit.
Not all energy-efficient improvements qualify for these tax credits, so
homeowners should check the manufacturer’s tax credit certification statement
before they purchase. Taxpayers can normally rely on this certification
statement which can usually be found on the manufacturer’s website or with the
Eligible homeowners can claim both of these credits on
Form 5695, Residential Energy Credits when they file their 2011 federal income
tax return. Because these are credits and not deductions, they reduce the amount
of tax owed dollar for dollar. An eligible taxpayer can claim these credits
regardless of whether he or she itemizes deductions on Schedule A. Link:
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