House to House
February 18-24, 2013
Today’s column is guest written by Donna Fuscaldo. She has written about personal finance for more than decade for Dow Jones Newswires, the Wall Street Journal, and Fox Business News. Donna is currently a freelance writer with her own home office.
The feds have resurrected, through 2013, $500 tax credits for energy-efficient home improvements, which had expired in 2011. If you upgraded one or more of the following systems in 2012, you may be eligible to take a tax credit on your 2012 return.
• Biomass stoves
• Heating, ventilation, air conditioning
• Insulation
• Roofs (metal and asphalt)
• Water heaters (non-solar)
• Windows, doors, and skylights
• Storm windows and doors
The energy tax credits are small, but at least a credit is better than a deduction:
• Deductions just reduce your taxable income.
• With a credit, you get a dollar-for-dollar reduction in your tax liability: If you get the $500 credit, you pay $500 less in taxes.
Limits on IRS energy tax credits besides $500 max
• Credit only extends to 10 percent of the cost (not the 30 percent of yesteryear), so you have to spend $5,000 to get $500.
• $500 is a lifetime limit. If you pocketed $500 or more in 2009, 2010, and 2011 combined, you’re not entitled to any more money for energy-efficient improvements in the above seven categories. But if you took $300 back then, for example, you can get up to $200 in 2012.
• With some systems, your cap is even lower than $500.
• $500 is the max for all qualified improvements combined.
Certain systems capped below $500
No matter how much you spend on some approved items, you’ll never get the $500 credit – though you could combine some of these:
System Cap
New windows $200 max (and no, not
per window – overall)
Advanced main air-circulating fan $50 max
Qualified natural gas, propane, or oil $150 max
furnace or hot water boiler
Approved electric and geothermal heat $300 max
pumps; central air-conditioning systems;
and natural gas, propane, or oil water heaters
Tax credits cover installation — sometimes
Rule of thumb: If installation is either particularly difficult or critical to safe functioning, the credit will cover labor. Otherwise, not. (Yes, you’d have to be pretty handy to install your own windows and roof, but the feds put these squarely in the “not covered” category.)
Installation covered for:
• Biomass stoves
• HVAC
• Non-solar water heaters
Installation not covered for:
• Insulation
• Roofs
• Windows, doors, and skylights
How to claim the energy tax credit
• Determine if the system you installed is eligible for the credits. Go to Energy Star’s website for detailed descriptions of what’s covered; then talk to your vendor. The site may not have been updated by the Department of Energy.
• Save system receipts and manufacturer certifications. You’ll need them if the IRS asks for proof.
• File IRS Form 5695 with the rest of your tax forms in 2012.
This article provides general information about tax laws and consequences, but isn’t intended to be relied upon as tax or legal advice applicable to particular transactions or circumstances. Consult a tax professional for such advice, and remember that tax laws may vary by jurisdiction.
Visit HouseLogic.com for more articles like this. Reprinted from HouseLogic.com with permission of the National Association Of Realtors.
House to House is distributed weekly by the Arkansas Realtors Association. For more information on homeownership in Arkansas, readers may visit www.ArkansasRealtors.com.