Don't Mess With Taxes

We had a relatively easy summer here in Central Texas, coping with only a week or so (instead of months) of 100-plus temperatures. And weather forecasters promise that winter 2010 won't be too harsh either.

But regardless of how moderate or severe your climate is, it never hurts to make sure the old homestead can weather any conditions. Not only will you be more comfortable inside your home, energy upgrades will help lower your heating and cooling costs.

Trust me. As someone who's have to replace a couple of central air units over the last few years, they are worth it.

So as we head into the the cooler part of the year here in the United States, the IRS (and I!) want to remind you that you might be able to get some tax help in upgrading your home's energy efficiency.

As IRS employee Shannon notes in the agency's video on these tax credits, this is the last year for some of the home energy tax credits expanded in the Recovery Act, aka Obama stimulus package.

Relatively easy upgrades worth $1,500: Under that legislation, the Nonbusiness Energy Property Credit equals 30 percent of what you spend on eligible energy-saving improvements to your home, up to a maximum tax credit of $1,500 for the combined 2009 and 2010 tax years.

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. That is, of course, as long as you haven't claimed the maximum on your 2009 filing.

Bigger tax payoff for going greener: If you want to make your home even more energy efficient, another tax credit that rewards investment in alternative energy equipment could pay off.

The Residential Energy Efficient Property Credit equals 30 percent of what you spend on solar electric systems, solar hot water heaters, geothermal heat pumps, wind turbines and fuel cell property. Generally, labor costs are included when figuring this credit. 

Even better, except for fuel cell property, there's no cap on the amount of credit available. Whatever is 30 percent of your costs is your credit.

Also, these credits are available for such upgrades you make by the end of 2016.

Improve carefully: Note, however, that not all energy-efficient improvements qualify for these tax credits. So be sure to check the manufacturer's tax credit certification statement before purchasing or installing any of these more costly improvements.

And the IRS cautions that the manufacturer's certification is different from the Department of Energy's Energy Star label, and not all Energy Star labeled products qualify for the tax credits.

Still, it's worth checking into, especially if your home is a bit drafty and you're fearful that cold breezes might soon be wafting through your home's rooms.

And if you think you don't want to go to the trouble, either to upgrade your home or file for the tax breaks, maybe this will be the incentive you need.

These are tax credits, not deductions, meaning they increase your refund or reduce the tax owed. And you don't have to itemize to claim them. Just use Form 5695, Residential Energy Credits, to figure and claim the home energy tax credits.

Related posts:

• Welcome summer with energy related tax breaks
• Improve your home
• Energy Star rebates aren't federal income
• Go green with your tax receipts
• Michigan tax tidbit: energy credits
• Arizona tax tidbit: solar energy credit

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