There is a lot of talk these days about going green. Even the American government is jumping on board, offering a number of tax credits that will entice United States citizens to make more environmentally-friendly decisions. Are you interested in knowing how you may benefit from these incentives? Here is a guide to understanding the energy conservation tax credit:
The Basics. Energy conservation tax credits are provided for by the American Recovery and Reinvestment Act of 2009, and fall into two categories – energy efficiency and renewable energy. Each category contains its own set of credits and qualifiers. Additionally, there are specific limits as to what, and how much, you can write off.
Who qualifies? Only homeowners qualify for the tax credits that fall under the residential portion of the American Recovery and Reinvestment Act. What’s more is that only home owners who actually live in the homes they are claiming can cash in on this incentive. That means that you will get no credit for second homes, vacation homes, investment properties, or rental units. Additionally, there is no credit offered to those who are building a new home.
How do you get an energy efficiency credit? To take advantage of the tax credits that fall into the energy efficiency category, you must make your existing, primary home more energy efficient. The most effective ways of doing that (and the most common tax credit claims) are adding insulation, updating heating and/or air conditioning systems, installing energy efficient appliances, and replacing old windows with energy efficient versions. You can only write off up to $1500 of the cost of energy efficient residential improvements you make. This may be up to 30 percent of what you spend on materials. You are not able to write off labor.
How do you get a renewable energy credit? In order to receive a renewable energy credit, you must purchase alternative energy equipment for your home. Some examples of alternative energy equipment include wind turbines, solar panels, solar-powered water heaters, and geothermal heat pumps. Just as with the energy efficiency credits, you can only write off up to 30 percent (or $1500) of the cost of the materials.
What other credits are there? You can qualify for even higher credits (between $2500 and $7500) by purchasing a plug-in vehicle. The amount you are credited depends on the battery power of the vehicle, and there are very specific requirements for the vehicle itself.
As you can see, there are many ways in which you may be able to qualify for energy conservation tax credits under the American Recovery and Reinvestment Act. For more information, you can visit the IRS.gov website.
About the Author: Tari Gudgell works hard to make her home energy efficient and safe. Her latest project involved installing commercial grade door hardware to better reinforce her garage against wind storms at her coastal home. She is now reevaluating her home’s energy efficiency.