Cut Your Tax Bill with Home Energy Credits

Did you know that it’s possible to trim your tax bill and save on your energy bills with certain home improvements? Here are some key facts you should know about home energy tax credits:

Non-Business Energy Property Credit

• Part of this credit is worth 10 percent of the cost of certain qualified energy-saving items you added to your main home last year. This may include items such as insulation, windows, doors and roofs.
• The other part of the credit is not a percentage of the cost. It is for the actual cost of certain property. This may include items like water heaters and heating and air conditioning systems. The credit amount for each type of property has a different dollar limit.
• This credit has a maximum lifetime limit of $500. You may only use $200 of this limit for windows.
• Your main home must be located in the U.S. to qualify for the credit.
• Be sure you have the written certification from the manufacturer that their product qualifies for this tax credit. It is usually posted on the manufacturer’s website or included with the product’s packaging. You can use this information to claim the credit, but do not attach it to your return. Keep it with your tax records.
• You may claim the credit on your 2016 tax return as long as you haven’t exceeded the lifetime limit in past years. Under current law, this credit is only available through December 31, 2016, for qualifying improvements to a taxpayer’s main U. S. home.

Residential Energy Efficient Property Credit

• This tax credit is currently 30 percent of the cost of alternative energy equipment installed on or in your home.
• Qualified equipment includes solar hot water heaters, solar electric equipment, wind turbines and fuel cell property. After the 2016 tax year, only solar hot water heaters and solar electric equipment will qualify.
• There is no dollar limit on the credit for most types of property. If your credit is more than the tax you owe, you can carry forward the unused portion of this credit to next year’s tax return.
• The home must be in the U.S. It does not have to be your main home unless the alternative energy equipment is qualified fuel cell property.
• This credit is available through 2021. The credit percentage will be reduced to 26 percent in 2020, and 22 percent in 2021.

To claim these credits use Form 5695, Residential Energy Credits. If you would like more information on this topic, please call our office.