Mary Beth Franklin, Senior Editor, Kiplinger's Personal Finance
If you made energy-efficient home improvements last year, such as installing insulation or replacing exterior doors and windows in your primary residence, you probably smiled all winter long as brutal storms battered much of the country. But now you get an added bonus: You can share the cost of those upgrades with Uncle Sam when you file your 2009 tax return.
The new home energy credit allows you to claim a tax credit equal to 30% of the cost of making energy-efficient home improvements, up to a maximum of $1,500. So if you spent at least $5,000 in 2009, you can get the full value of the credit. (A tax credit, which reduces the amount of tax you owe, is more valuable than a tax deduction, which merely reduces the amount of income subject to tax.)
In addition to windows, doors, skylights and insulation, the new, enhanced home energy credit also applies to super-efficient central air-conditioning units, heat pumps, furnaces and water heaters. And you don’t have to itemize to claim the credit, either. Just fill out Form 5695. Anyone can claim it, regardless of income.
Even those taxpayers subject to the alternative minimum tax (AMT), an alternative tax system that disallows many deductions and credits, can claim the home energy tax credit on their 2009 returns. Although the credit is available through 2010, the $1,500 maximum applies to the two-year period. So if you claim the full $1,500 credit on your 2009 return, you are not eligible for additional credits in 2010. But if you didn’t get around to a home-improvement project last year, you still have time to cash in this year. A similar home energy tax credit, with a $500 lifetime cap, existed in 2006 and 2007. (There was no credit available for 2008). But that lifetime limit has no impact on the new tax credit. That means you are eligible to claim up to $1,500 in total credits in 2009 and 2010 even if you previously claimed the $500 credit.
Alternative energy
Homeowners who installed renewable-energy devices qualify for an even bigger tax break: 30% of the cost, with no maximum. (The previous $2,000 cap on the tax credit has been repealed.) Qualifying improvements include geothermal heat pumps, solar-powered water heaters, solar panels, fuel cells and small wind-energy systems (see www.energytaxincentives.org for details). The equipment can be installed in new or existing homes.
To claim the credit on your 2009 tax return, you must have installed the equipment by December 31, 2009. But if you didn’t, there’s still plenty of time to cash in on this tax break, which is available through 2016. To qualify for the credit, no part of the system can be used to heat a swimming pool or hot tub.
If you installed both energy-efficient improvements and a renewable-energy device last year, you can claim both tax credits on your 2009 return.
© 2010 The Kiplinger Washington Editors, Inc.
Learning Center content provided for informational purposes only. Northfield Bank does not provide tax or legal advice. Please consult your tax and/or legal advisors regarding your particular circumstances.
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