One way to control the cost of home energy use is to make your home more energy efficient. Better still when those energy-saving improvements qualify for a federal tax credit. Fortunately, individual taxpayers are allowed a personal tax credit for energy-efficient improvements to their principal residence. The Nonbusiness Energy Property Credit (Residential Energy Credit) has been available since 2006 and was recently extended through 2013.
The Residential Energy Credit equals 10% of certain qualified expenditures plus 100% of certain other qualified expenditures, subject to a maximum overall credit of $500. That’s pretty modest, and the $500 cap must be reduced by any credit claimed in an earlier post-2005 year. This restriction will cause some taxpayers to be ineligible for 2013. Still, for those who are eligible, $500 is a lot better than nothing.
The good news is the credit, when allowed, covers a broad range of energy-saving expenditures for a taxpayer’s principal U.S. residence (including a manufactured home). Plus, it’s available against alternative minimum tax (AMT) and there are no income restrictions. However, expenditures for vacation homes and foreign residences are ineligible.
The Residential Energy Credit equals the sum of (a) 10% of the amount paid for qualified energy-efficient improvements (i.e., building envelope components meeting certain requirements) installed during the tax year (no more than $200 of which could be for new windows), and (b) the amount of any residential energy property expenditures (i.e., $50 for each advanced main air circulating fan; $150 for each qualified natural gas, propane, or oil furnace or hot water boiler; and $300 for qualified energy-efficient property, including heat pumps, water heaters, and central air conditioners) paid during the tax year.
Expenditures for site preparation, assembly, and installation are counted in determining the allowable expense for the items listed in (b), but not (a).
Please contact Martini, Iosue & Akpovi by phone at (818) 789-1179 if you have questions or want more information.