Considering Energy-Saving Improvements? Act Now And Get A Tax Bonus

EnergyStarLogoThe “Non-business Energy Property Credit” expires when the cork pops on New Year’s Eve. Homeowners making energy-saving improvements before the end of this year can both cut the cost of heating and cooling their homes and lower their 2010 tax bill as well. You can now weatherize your home and get a tax bonus for doing so. The non-business energy property credit equals 30 percent of what you spend on eligible energy-saving improvements, up to a maximum tax credit of $1,500. According to the IRS, 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, you can save as much as $1,500 on your 2010 federal income tax return. These tax savings are on top of any energy savings that may result.

Not all energy-efficient improvements qualify for the 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 credit is a direct offset against tax, not a deduction. Therefore, it increases your refund or reduces the tax you owe. If you’re eligible, you can claim the credit even if you don’t itemize deductions.

Even if you’re not thinking about energy savings, you should consider a new heating and cooling system now if your present equipment is nearing the end of its useful life. The tax law is essentially offering you what amounts to a heavy discount on your purchase of qualifying equipment if you make the purchase before the end of the year. This applies as well to water heaters, doors, windows and insulation.

You claim the credit on IRS Form 5695, Residential Energy Credits, which form can be found on the IRS website under the heading Forms and Publications. Following the Form 5695 on the IRS website you’ll find instructions that spell out eligibility requirements in more detail.

Gerald J. Robinson, Esq., formerly tax counsel to the New York City law firm of Carb, Luria, Cook & Kufeld, is a member of the New York and Maryland bars. He received his B.A. degree from Cornell University, an LL.B. from the University of Maryland and an LL.M. in Taxation from New York University. Prior to entering private practice he served in the Office of Chief Counsel, Internal Revenue Service. He is the author of the treatise, Federal Income Taxation of Real Estate, now in its sixth edition, and wrote the monthly newsletter, Real Estate Tax Ideas, both published by Warren, Gorham & Lamont. He is also a frequent lecturer and contributor to various professional journals. Newjerseynewsroom.

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  1. no. it is not refundable. not sure what he means that it is not a deduction. it only reduces your tax liability. (you might still have tax liability even if you end up with a refund – therefore even if you are getting a refund it might increase your refund).

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